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What you describe would be the “bull case” dozens of billions in valuation ago. Right now we are quite disconnected from that, in my analysis. To justify thei

What you describe would be the “bull case” dozens of billions in valuation ago. Right now we are quite disconnected from that, in my analysis. To justify their current valuation, the “bull case” is for them to dominate the entire automative industry (not just the EV segment) and do an Amazon-like turnaround of losses into profitability. Anything short of that, their valuation is ludicrous.

300bps 7y ago
Tesla is not just a car manufacturer though right? They are a solar company and battery company too. They could conceivably have astronomical growth in both of those segments.
- andrewmunsell 7y ago
  The valuation of Tesla also seems very high to me at first, but given their growth in the other segments such as energy storage and generation, I absolutely think that the valuation could be justified. Tesla owns the entire vertical from battery cell manufacturing, using those cells to do work (automotive), home and grid energy storage, and solar generation. Throw in the rest of Elon’s companies and you also get the transportation network itself (Boring) and even the data provider for these cars that need to be highly connected (Starlink). And if you really want to believe Elon, some weird, someday a pressurized version of the Cybertruck might become the transportation off of this planet.
- beamatronic 7y ago
  Other car manufacturers would be smart to source their batteries from Tesla.
  - grecy 7y ago
    I doubt Tesla will sell to them, Elon has said a few times their vehicle output is constrained by how many battery cells they can make. If they sell those cells to other manufacturers, they won't be able to make so many cars themselves.
    - blaser-waffle 7y ago
      Making vehicles is hard. There are a lot of logistical and technological challenges, plus the deep penetration of cars into society means that marketing, perception, and utility are on the lips of the hyper-rich down to the common man. With batteries... you just make batteries. With cars you have to score adequate or better in lots of different areas to be competitive.
- aeternum 7y ago
  And that's not all. They are also now a chip maker, an insurance company, a technology company with some of the leading research and IP in self-driving, and also leaders in automated manufacturing.
rodgerd 7y ago
They would have to do substantially better than Amazon, who lost far less money before becoming profitable.
- megablast 7y ago
  Hardware startups are always harder.
mrep 7y ago
> To justify their current valuation, the “bull case” is for them to dominate the entire automative industry (not just the EV segment) Toyota has over twice the market cap that Tesla has (230 billion vs 105 billion) and considering how big the auto industry is outside of just these 2 companies, I don't know how you think an automotive company at 105 billion is vastly overvalued.
- hyperbovine 7y ago
  The argument is not that no car maker deserves to be valued at $XXX billion. It's that Tesla, which produced around ~1/30th the number of autos as Toyota last year, probably shouldn't have a market cap that's anywhere near Toyota's.
  - grecy 7y ago
    I think your mistake is in assuming that Tesla only makes cars, and the number of them they make is the only factor that goes into their valuation. They also have the world's biggest charging network, storage solutions, solar solutions and produce more batteries than virtually everyone else combined. Mercedes actually just put out a press release that said they can't build enough electric cars because they can't build enough batteries, because Tesla acquired the company they were going to use in 2016. Evidently Mercedes have done exactly zero about that in the years since. Of course Tesla also have the whole "self driving car" thing they've been working on for a while. If they crack that one in the next ~24 months, their valuation will easily top Toyota's, because they're worth so much more than just how many cars they can build.
    - xkjkls 7y ago
      How much of their revenue comes from not making cars?
      - grecy 7y ago
        Good point. Right now it's not much, but I think the valuation is based on the speculation that it could soon be a lot. Right now revenue from energy storage resembles Tesla's auto business in 2013[1].. so if it grows at the same rate... [1] https://twitter.com/kerooke/status/1222637828741439488 https://twitter.com/kerooke/status/1222637828741439488
jonplackett 7y ago
It’s funny how closely Tesla mirrors iPhone and the doubts everyone had about that VS The traditional phone makers. “No-one wants a touch screen keyboard” etc, the CEOs said as their business evaporated. Tesla are still at iPhone 3G point I reckon, having just released their first affordable car. Also consider that while they are so far ahead - they are still accelerating. And the traditional car makers haven’t even realised they’re in a race to the death yet. Most countries have barred the sale on non-EV cars in couple of decades. That’s not actually that far away. Or self driving could make all other cars seem like Nokia 3310s.
wuschel 7y ago
Out of curiosity: Could you explain your reasoning with numbers? Cheers!
Diederich 7y ago
Even as a long-time Tesla fan, I think their stock price is fairly excessive. > the “bull case” is for them to dominate the entire automative industry (not just the EV segment) Is Tesla's market valuation highest than the highest valued automakers?

300bps 7y ago

Tesla is not just a car manufacturer though right? They are a solar company and battery company too. They could conceivably have astronomical growth in both of those segments.

andrewmunsell 7y ago
The valuation of Tesla also seems very high to me at first, but given their growth in the other segments such as energy storage and generation, I absolutely think that the valuation could be justified. Tesla owns the entire vertical from battery cell manufacturing, using those cells to do work (automotive), home and grid energy storage, and solar generation. Throw in the rest of Elon’s companies and you also get the transportation network itself (Boring) and even the data provider for these cars that need to be highly connected (Starlink). And if you really want to believe Elon, some weird, someday a pressurized version of the Cybertruck might become the transportation off of this planet.
beamatronic 7y ago
Other car manufacturers would be smart to source their batteries from Tesla.
- grecy 7y ago
  I doubt Tesla will sell to them, Elon has said a few times their vehicle output is constrained by how many battery cells they can make. If they sell those cells to other manufacturers, they won't be able to make so many cars themselves.
  - blaser-waffle 7y ago
    Making vehicles is hard. There are a lot of logistical and technological challenges, plus the deep penetration of cars into society means that marketing, perception, and utility are on the lips of the hyper-rich down to the common man. With batteries... you just make batteries. With cars you have to score adequate or better in lots of different areas to be competitive.
aeternum 7y ago
And that's not all. They are also now a chip maker, an insurance company, a technology company with some of the leading research and IP in self-driving, and also leaders in automated manufacturing.

rodgerd 7y ago

They would have to do substantially better than Amazon, who lost far less money before becoming profitable.

megablast 7y ago
Hardware startups are always harder.

mrep 7y ago

> To justify their current valuation, the “bull case” is for them to dominate the entire automative industry (not just the EV segment) Toyota has over twice the market cap that Tesla has (230 billion vs 105 billion) and considering how big the auto industry is outside of just these 2 companies, I don't know how you think an automotive company at 105 billion is vastly overvalued.

hyperbovine 7y ago
The argument is not that no car maker deserves to be valued at $XXX billion. It's that Tesla, which produced around ~1/30th the number of autos as Toyota last year, probably shouldn't have a market cap that's anywhere near Toyota's.
- grecy 7y ago
  I think your mistake is in assuming that Tesla only makes cars, and the number of them they make is the only factor that goes into their valuation. They also have the world's biggest charging network, storage solutions, solar solutions and produce more batteries than virtually everyone else combined. Mercedes actually just put out a press release that said they can't build enough electric cars because they can't build enough batteries, because Tesla acquired the company they were going to use in 2016. Evidently Mercedes have done exactly zero about that in the years since. Of course Tesla also have the whole "self driving car" thing they've been working on for a while. If they crack that one in the next ~24 months, their valuation will easily top Toyota's, because they're worth so much more than just how many cars they can build.
  - xkjkls 7y ago
    How much of their revenue comes from not making cars?
    - grecy 7y ago
      Good point. Right now it's not much, but I think the valuation is based on the speculation that it could soon be a lot. Right now revenue from energy storage resembles Tesla's auto business in 2013[1].. so if it grows at the same rate... [1] https://twitter.com/kerooke/status/1222637828741439488 https://twitter.com/kerooke/status/1222637828741439488

jonplackett 7y ago

It’s funny how closely Tesla mirrors iPhone and the doubts everyone had about that VS The traditional phone makers. “No-one wants a touch screen keyboard” etc, the CEOs said as their business evaporated. Tesla are still at iPhone 3G point I reckon, having just released their first affordable car. Also consider that while they are so far ahead - they are still accelerating. And the traditional car makers haven’t even realised they’re in a race to the death yet. Most countries have barred the sale on non-EV cars in couple of decades. That’s not actually that far away. Or self driving could make all other cars seem like Nokia 3310s.

wuschel 7y ago

Out of curiosity: Could you explain your reasoning with numbers? Cheers!

Diederich 7y ago

Even as a long-time Tesla fan, I think their stock price is fairly excessive. > the “bull case” is for them to dominate the entire automative industry (not just the EV segment) Is Tesla's market valuation highest than the highest valued automakers?