Cathie Wood-led ARK Invest believes Tesla Inc. (NASDAQ:TSLA) CFO Vaibhav Taneja‘s comments about the automaker wanting to develop all modes of transportation may hold some water and it has to do with CEO Elon Musk‘s other enterprises, including Space Exploration Technologies Corp. (NASDAQ:SPCX) and The Boring Company.
Intercontinental SpaceX Flights?
In an article published on Monday, ARK said that Tesla will likely collaborate with The Boring Co. to “circumvent congestion” and move some Robotaxis underground. “It might also aim for electric aviation,” ARK said, pointing to Musk hailing Heart Aerospace‘s maiden all-electric flight that lasted 27 minutes.
“SpaceX also is targeting intercontinental travel, as Starship could cut the time for long-haul international flights to less than 30 minutes,” the investment firm said in the article.
FSD Demand is Increasing
The firm said Robotaxis will create “substantial” shareholder value, pointing to earlier comments about the business representing more than 80% of Tesla’s enterprise value in the future.
“From the second to the third quarter, the percent of North American deliveries with an FSD subscription increased from ~55% to more than 75%, a stunning conversion rate,” ARK said.
It also drew comparisons with General Motors Co. (NYSE:GM) and SiriusXM Holdings Inc. (NASDAQ:SIRI). GM’s Super Cruise assisted driving system offered three-year trials and had a conversion rate of 40%, ARK said.
On the other hand, SiriusXM, which offered three- to 12-month trials, had a conversion rate of 39%. ARK also said that both services offered longer trials that were conducive to conversion.
ARK then factored in pricing, saying that SiriusXM cost $11-$21 per month, while Super Cruise was at $40 per month, compared to Full Self-Driving’s (FSD) $99/month price.
“That Tesla’s conversion rate is outpacing them with a shorter trial period and a higher price point suggests that customers consider FSD more essential than optional,” the firm said.
ARK on SpaceX-Tesla Merger
ARK Invest released an analysis of the potential Tesla-SpaceX merger after the companies’ boards convened special committees to consider a combination. It says the merger would be a “substantial win for both shareholder bases,” while pointing to increased convergence between both businesses in terms of sharing technologies.
“Starlink satellite antennas are going into Tesla’s Cybercabs,” while SpaceX’s Grok was also being offered in Tesla’s in-vehicle experiences, ARK said. “Elon Musk’s stated payload for the first uncrewed Mars missions includes Cybertrucks and Optimus bots,” the firm added.
“Tesla’s shareholders would enjoy a 3.8-fold increase in returns on each invested dollar, whereas SpaceX investors’ incremental return would be 7.2x higher,” ARK said.
Notably, investor Gary Black of The Future Fund LLC had earlier said that while a merger was “inevitable” between the two enterprises, it did not hold much merit for Tesla shareholders.
The firm also said that in a merger, Tesla shareholders will own close to 42% of equity post-dilution, but that the joint entity’s majority of revenue would be from SpaceX. Notably, ARK’s earlier model on Tesla said that 62% of the combined entity’s revenue would be from SpaceX.
Price Action: Tesla shares were up 0.24% at $393.56 during after-hours trading on Monday. SpaceX shares were up 0.29% at $147.33.
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