Tesla Market Cap Extra Than Market Cap of Toyota, BYD, GM, Ford, Hyundai, Kia, Mercedes-Benz, Stellantis, Geely, Ferrari, BMW, Volkswagen Group, Honda, Nissan, Renault, XPENG, and NIO Mixed

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I simply caught up on feedback underneath an article I wrote a number of days in the past, “Is Tesla Actually In Bother This Time?” There have been many nice feedback from readers, however a number of jumped out at me to stimulate this followup piece. The primary one got here from vensonatawho wrote:

“The mixed worth of all automotive corporations on the planet excluding Tesla is about 1.3 trillion USD. And Tesla’s market cap is simply that. So if Tesla made all of the automobiles on the planet it will justify its current market cap. And if by some miracle they handle to make true totally self driving automobiles, it will not improve the cash spent on automobiles, as a result of patrons of automobiles are already maxxed out. And hasn’t Elon mentioned that these robotaxis can be inexpensive somewhat than costlier? So the sum of money out there in the whole world for buying automobiles doesn’t justify essentially the most hyper optimistic imaginative and prescient of Tesla. The truth is the alternative turns into clear. Tesla has no doable technique to justify its worth at something above say BMW which produces about the identical variety of autos with a great margin, and has market cap of 88 billion USD.”

It’s an interesting sequence of factors and argument. I’ll come again to among the factors, however to begin off, I used to be shocked by the opening assertion, “The mixed worth of all automotive corporations on the planet excluding Tesla is about 1.3 trillion USD.” Has it actually gotten to that?!

I don’t know all of the automakers of the world, however I ran via a bunch of them and picked up their market cap totals following the shut of market as we speak. Right here’s what I discovered (values in billions of USD):

Including up the market cap of all of these automakers besides Tesla, I bought $1,161.11 billion. That’s nonetheless about $130 billion in need of Tesla. So, yeah, vensonata is correct….

Then we get to the acute theoretical: All of these different corporations shutting down and Tesla promoting all of the automobiles on the planet. Would Tesla’s valuation then make sense?

In fact, the inventory is price no matter individuals can pay for it, and Tesla’s market cap is so excessive as a result of its inventory value is so excessive. There’s the concept the way forward for Tesla is vibrant (which can or will not be true) and the futures of those different automakers are dim (extremely unlikely throughout the board, particularly when you think about their gross sales tendencies and see Tesla has had one of many worst gross sales tendencies of the previous couple of years whereas a number of different automakers have seen their gross sales develop).

Frankly, it’s actually exhausting to elucidate Tesla’s market cap. That’s the place another nice feedback are available in.

“Tesla and Musk have satisfied a heck of lots of traders to view Tesla as a speculative startup wager and ignore the declining car gross sales,” a commenter named Michael wrote. “Nevertheless it doesn’t seem that even the institutional traders are demanding the protections or threat premiums {that a} typical enterprise capital investor can be in search of. I imagine that that is more likely to finish badly for lots of traders, however I hesitate to foretell when. A inventory collapse would require a change in market psychology, and its exhausting to foretell after they happen.”

Elsewhere, in response to a different commenter, he expanded on this. “I feel it’s superb to make a speculative wager on the long run. I’ve spent most of my profession in tech startups, and have executed that repeatedly. The odd factor about Tesla is that traders aren’t demanding a threat premium consistent with the extent of hypothesis concerned. Or to place it one other means, the inventory is priced assuming future success, somewhat than a major potential for failure.”

There are a number of nice factors there. Beginning on the finish, although, that is among the issues that’s fairly bizarre — and makes me and others really feel like TSLA is a bubble on the verge of bursting. It additionally will get to the purpose of vensonata’s remark. The market cap is mainly assuming Tesla achieves all of its goals after which some. It doesn’t assume Tesla’s gross sales pattern from the previous two years (a long-term gross sales decline) goes to proceed, however assumes the corporate will truly flip to gross sales progress once more and that progress will explode. Neglect 2 million car gross sales a yr (a goal Tesla nearly reached earlier than its gross sales began dropping), it’s going to obtain 20 million! Or 30 million! Plus all these robots individuals will purchase for $30,000+ every.

I imply, it’s so fantastical that it’s exhausting to imagine.

And there may be mainly no warning constructed into the inventory value and market cap to contemplate the potential for Tesla not seeing explosive progress once more, not attaining its excessive, unprecedented targets.

Individuals appear to simply be pondering “Oh, Tesla is successful, I would like to purchase Tesla inventory.” Or “Tesla goes to guide us into a brand new tech future, I would like to purchase Tesla inventory.” That is regardless of Tesla gross sales dropping considerably in recent times, the corporate repeatedly lacking CEO Elon Musk’s robotaxi targets and guarantees, and opponents getting higher and higher — in the entire classes Tesla competes in.

Even assuming Tesla succeeds and sells 2–3 million robotaxis a yr, or let’s be wild and say 5 million, does a market cap of $1.3 trillion make any sense?

As Michael says, “Nevertheless it doesn’t seem that even the institutional traders are demanding the protections or threat premiums {that a} typical enterprise capital investor can be in search of. I imagine that that is more likely to finish badly for lots of traders, however I hesitate to foretell when.” Sure, the shortage of warning from institutional traders is a bit surprising, particularly after they took so lengthy to see Tesla as something however an enormous threat. However right here’s the kicker: “A inventory collapse would require a change in market psychology, and its exhausting to foretell after they happen.” Some form of mass serious about Tesla has to shift for issues to alter a lot. The essential thought round Tesla has to undergo a change. Proper now, it’s seen as some vibrant, younger, however large startup that’s destined to succeed at disrupting market after market. The idea of the corporate has to alter considerably for the inventory value to drop in the same method. And who is aware of when that may occur?