Shorting Tesla (NASDAQ: TSLA) has been a widowmaker trade and fans of the company and its CEO have amped up the stock by more than 160% over the past year to become the first trillion-dollar automaker ever, joining the most rarefied of rarefied clubs.
The first production model Tesla rolled off the line in 2008, and shortly thereafter Elon Musk became CEO. Traditional carmakers remained asleep at the wheel of their oil burners for almost a decade after the first Tesla hit the road. Astonishingly, it wasn’t until 2017 that executives at the world’s largest auto companies identified battery electric vehicles as the top trend in the industry.
Announcements by incumbents of going electric and spending billions doing so have come thick and fast since then. Volkswagen (XETRA: VOW), which owns marques like Audi, Skoda, Bentley, Lamborghini and others, has been the most aggressive – pledging to spend $86 billion through 2030 with a target of 50% of sales to be electric by then.
But Tesla remains way out in front – so far this year the company is responsible for 26% of all the battery power found in newly-sold passenger cars hitting the road, double the kWh of its nearest competitor VW. On a kWh-basis Volkswagen is the number two seller of electric cars, with a 12.9% global market share, about the same as the Model 3 by itself.
Tesla’s relative valuation shows investors regard the age of the internal combustion engine as well and truly over. To test this theory, MINING.COM assigned a value of zero to VW’s traditional vehicle business.
This way investors can compare traditional automakers like VW with Tesla, based on their ability to compete in the battery powered light duty vehicle market. For the sake of apples vs apples, the comparison also excludes all the battery power in the plug-in hybrids VW sells.
For the sake of accuracy, only end-user registered vehicles are counted – not reported production numbers, dealer deliveries or sales projections. At Tesla’s current market valuation, every GWh in the company’s cars sold this year to end-August is worth $30 billion in market cap.
The company’s closest competitor, Volkswagen attracts just over $8.4 billion for the same achievement. Volkswagen would be worth $510 billion if investors were as charged up about its electric cars as they are about Tesla’s.
Again, it’s full electric cars only – anything else Wolfsburg produces is worthless under this scenario. Golf GTI, Audi and Lamborghini Aventador? Relics of a bygone era. Those Bugattis and Bentleys? Not even worth anything as scrap metal.
Put another way, Tesla’s sheet metal, interior finishes, suspension, paint jobs, audio-systems, tires, wiper blades, headlights, and those oh-so-big touch screens are worth $500 billion more than the same stuff in your average VW.
(Google “Tesla build quality” if you think $500 billion may be a tad rich.)
But it’s the over-the-air software updates, the “full” self-driving system and our glorious robo-taxi future that’s worth so much (and probably double that) —is the argument.
Perhaps, as long as you can get it out of the parking lot.
This is a lazy analysis. The brand recognition alone is worth more than most legacy automakers. Not to mention the stock market is pricing in future growth not even mentioned here. Did you forget about Tesla Energy, the supercharger network, Tesla Service Centers, Tesla R&D, Tesla Battery Production and Tesla insurance? How about the million or more cybertruck reservations? Please keep the armchair click bait stories to CNBC and Business Insider. The story of how TSLA valuation rose to this level is long and storied. Call me a Tesla super fan I’m ok with it as Tesla has proven the haters wrong time and time again. The stock is volatile so it may drop back to 500 billion tomorrow. In the meantime keep you head in the sand how Tesla alone is transforming many established industries.
Tesla have shown to be more inventive, guess Tesla in that way remind many of Apple before the CEO died.
He makes some good points in the article though. Many promises not fulfilled by Tesla.
What I take issue with is how Frik takes a couple cheap shots at a company that single handily transformed how vehicles will be powered, interact with and is pushing the boundary for autonomous driving among other transforming products. The comparison with VW is simplistic and click bait. Tesla is such a young company it will take longer than expected to deliver on promises that are changing the world. Instead of criticizing we should be celebrating the accomplishments made thus far. I won’t be trusting Level 5 autonomous driving until it is operational for at least a few years but on the freeway the autosteer and autopilot is amazing TODAY! Also, name another automaker that allows costumers to perform an over the air upgrade and cash in 12k (acceleration boost and full self driving)! I can also schedule and approve service that comes to me and order accessories right from the app. The list of innovations is too long for anyone to bother reading about but it all adds up to a winning formula that no one can match right now. I believe Tesla like Amazon will be hard to recognize in 10 years or less as it will be much more than a car maker.
Ok one more, my kids don’t even play the xbox anymore they simply sit the tesla in the garage and play games on it. They love it more than I do. That is priceless and is similar to apple in that regard. Who would of guessed we all would stare at our phones for hours on end.
Pie in the sky
Tesla is great, but too much pie in The sky in your comment – and that is not honest analysis!