Hi Floe, smart post. One question; on the sbc article Burry showed how Tech companies pump ammortization years to pump profits, here is a kind of opposite, why this situation?
Hi Albert! Good question, I have also been thinking about this and I’m not sure why they do it this way. It might be just (1) They don’t care that much about their reported profit/stock price as they just own it for decades and (2) They use maximum depreciated from a tax point of view to minimize taxes paid and maximize cash flow available for growth… Not sure if that’s the case though.
Who do they sell their used vehicles to ? In a way, you could think of that as a 'customer.' Any chance they won't continue to get above book value on future sales ?
They have a large network of garages they partner with, where customers can go for planned or unplanned repairs. At end of use, there are 3 pathways through which the cars can be sold:
Online website by Alquiber
To garages in the network who resell them
To customers
So there are quite a number of paths here through which the car finds a new owner.
Rather than sort of customer demand, I think used car prices could go down if new cars become materially better then used cars, for example because of self driving or because of higher oil prices.
I think both impacts are limited though. Self driving doesnt really help for vans, and higher gas prices are a limited factor
Hi Floe, smart post. One question; on the sbc article Burry showed how Tech companies pump ammortization years to pump profits, here is a kind of opposite, why this situation?
Hi Albert! Good question, I have also been thinking about this and I’m not sure why they do it this way. It might be just (1) They don’t care that much about their reported profit/stock price as they just own it for decades and (2) They use maximum depreciated from a tax point of view to minimize taxes paid and maximize cash flow available for growth… Not sure if that’s the case though.
Another great write up, Thanks
Who do they sell their used vehicles to ? In a way, you could think of that as a 'customer.' Any chance they won't continue to get above book value on future sales ?
They have a large network of garages they partner with, where customers can go for planned or unplanned repairs. At end of use, there are 3 pathways through which the cars can be sold:
Online website by Alquiber
To garages in the network who resell them
To customers
So there are quite a number of paths here through which the car finds a new owner.
Rather than sort of customer demand, I think used car prices could go down if new cars become materially better then used cars, for example because of self driving or because of higher oil prices.
I think both impacts are limited though. Self driving doesnt really help for vans, and higher gas prices are a limited factor