Why Tesla = GM + Honda + Ford + Fiat Chrysler + Daimler

Tesla = GM + Honda + Ford + Fiat Chrysler + Daimler

Tesla is now worth a General Motors plus a Honda plus a Ford, plus a Fiat Chrysler and a Daimler. Then you’ve got pretty much what Tesla is now worth.

$183 billion.

Toyota, which used to be the most valuable car brand in the world, is now worth $174 billion according to Yahoo Finance.

Tesla stock has been on a tear since March, when it dropped down to $361 per share. Now it’s been north of the $1,000 line at $1,025 (before dropping slightly on profit-taking) for a total market capitalization that’s now about $10 billion north of Toyota. Toyota stock has been mostly flat for the past year.

Of course, stock market valuation doesn’t tell the whole story.

There were about 65.5 million cars sold globally in 2019, including 21 million in China, 17 million in the U.S., 16 million in Europe. Toyota had just over a 10% share of that market, followed by Volkswagen at 7.6%, Ford at 5.6%, and Hyundai at just over 5%.

Global automotive market share in 2019 by brand STATISTA

Tesla doesn’t even show up at that scale.

Tesla sold 367,500 vehicles globally in 2019, compared to more than 6.5 million for Toyota. In the U.S. alone, Nissan, Honda, Ford, Chevrolet, and Toyota are in the millions

Market capitalization, clearly, isn’t necessarily about market share. Nor is it primarily about the past.

Instead, investors are betting that Tesla’s technology is a critical differentiator.

Battery technology

The company’s EV (electric vehicle) technology is the best in the world, bar none. The Model 3 uses less electricity to travel than similar vehicles in class and weight. In fact, the Model 3’s efficiency “is the highest of any production car at highway speeds, with outstandingly low energy consumption,” saysCleanTechnica. The Model X outperforms the Audi e-tron in efficiency as well.

That’s important, because it means longer range. And range — I say this as a Nissan Leaf owner — is critical in EVs.

What that real and perceived leadership translates into is sales leadership. As EVword says, “People don’t just want an EV, they want a Tesla.”

Self-driving technology

Tesla’s self-driving technology is also the best currently shipping in the world, and improving at a faster rate than any other automotive manufacturer. While not yet close to perfect — and while Tesla has probably been too aggressive in promoting it — Tesla’s Autopilot technology is learning from far more miles driven than any other competitor.

As the company’s sales grown, that gap just keeps getting bigger. When it’s good enough — and legally permitted — Tesla plans to start a fleet of driverless taxis, likely using owners’ own cars.

Tesla is not focusing on the fully autonomous market just yet, requiring an alert human driver at all times (which doesn’t always happen). But you can bet that’s coming when the company thinks its Autopilot technology is good enough — and when it can pass regulatory approval.

Google’s Waymo has driven more miles fully autonomously, GM’s Cruise is interesting, but Tesla is getting more miles of driving data for its AI systems to crunch and learn from. And self-driving cars are an existential goal for CEO Elon Musk.

Asked by an analyst what Autopilot development was costing Tesla, CEO Elon Musk replied, “It’s basically our entire expense structure.”

Energy-generation technology

Tesla also owns a bigger piece of the value chain than most automotive manufacturers.

The company’s solar panels, when available, could eventually be a bigger business, along with its home battery solutions, than cars. From panels to a full solar roof to commercial arrays, the potential for business here with the world going green for energy is massive.

Renewable energy could be a $1.5 trillion market in 2015, and Tesla is poised to capture some of that.

On a basic financial level, Tesla has beaten earnings estimates recently. It’s also shown an ability to manufacture globally with a massive new factory in the biggest car market on the planet (China). As its shipments continue to increase, Tesla has the ability to boost efficiencies as well, which should improve profitability.

At least one analyst says the stock could be worth $7,000 per share by 2024.

That’s Pollyannyish in the extreme.

But there seems to be enough future potential in Tesla cars, power, and self-driving technology — even before you look at its celebrity owner Elon Musk — for investors to stay enthusiastic about Tesla stock. Even though what goes up quickly in the stock market seems, quite frequently, to also come down quickly.

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