Tag Archives: Vehicles

Tesla’s Shares Are Priced For a Future Where Tesla Makes Every Car on Earth

Reading about the enormous run-up in shares of Tesla, Inc., I wondered something…is Tesla bigger than the entire rest of the auto industry?

The answer is: almost. Tesla’s market cap ($655 billion), is nearly equal to the combined market caps of Toyota, GM, Ford, VW, Daimler, Fiat, BMW, Honda, Hyundai, Nissan, Mazda, Subaru and Aston Martin ($750 billion), per Yahoo Finance data. That’s pretty much the auto industry, with the notable exception of SAIC of China.

So, will Tesla make every car on earth? Probably not. Indeed, what scenario investors are expecting is unclear:

It doesn’t make sense that nearly all the cars sold in the world in the future will be Tesla vehicles, nor does it make sense that the size of the global auto market will double.

Therefore, Tesla’s massive market cap compared to the largest legacy auto companies in the world seems to suggest that investors believe other businesses outside of pure auto unit sales will play an extremely large role in Tesla’s future business model.

Tesla has come out with some interesting non-auto products like its solar roof tiles and Power Wall, but does that make it worth three times as much as Toyota, the next largest auto company by market cap ($213 billion)?

Keep in mind, Toyota sold almost 10 million vehicles last year. That’s nearly 20 times as many as Tesla.

I’m a huge fan of Tesla and Elon Musk. I think it’s an amazing company and Musk is one of the greatest innovators and entrepreneurs of all time. But, it’s hard to justify the stock’s current level.

If you found this post interesting, please share it on Twitter/LinkedIn/email using the buttons below. This helps more people find the blog! And please leave a comment at the bottom of the page letting me know what you think and what other information you’re interested in!

Photo: “Tesla Chairman Elon Musk” by kqedquest is licensed under CC BY-NC 2.0