26 ms·

Tesla's market cap now accounts for roughly 1/3rd of the global automaker market

153 points by jonathanleane 6y ago

jonathanleane 6y ago
Hi guys - long time lurker, very seldom do I post or comment, but thought that HN might be interested in this. Although TSLA's market cap is down a bit from when I wrote the article, it still makes up something like 30% of the global automaker market, despite only publicly listing 10 years ago! Is it overvalued or in a bubble? I'll leave that for you to decide.
- nugget 6y ago
  Investors want to "buy the future" and seem to have placed an enormous premium on companies that are disruptive to the status quo. It's hard to say whether it's a bubble or not, because value is always part perception. I will say that the current period feels more disruptive than any I have lived through in the past (dot com 1.0, 2008-2009). And it feels like the disruption can happen faster now; like nobody is safe, and any older Fortune 1000 company can be rendered obsolete within a decade by a new startup.
  - MattGaiser 6y ago
    And the existing companies companies do very little about their competition. I didn't invest in Amazon earlier as I thought the retailers would invest in trying to compete. Nope.
    - gogopuppygogo 6y ago
      Retailers are largely still not profitable with internet sales. Pre-pandemic a brick and mortar was doing about 5-10% via online and it was at best break even. Why would you invest money in something that was unprofitable when Amazon wasn’t even profitable for so long?
      - ethbr0 6y ago
        The problem most retailers face is that competing with Amazon requires substantial, multi-year capex into their supply chains. The more forward thinking realized that the catch-up bill was only going to get more expensive, as Amazon continued growing and optimizing. The less forward thinking... well, there's Sears. As consumers, we rarely see "how" free 2-day shipping, same day delivery, BOPIS, etc. But suffice it to say, it's very expensive to retool legacy supply chains optimized for brick and mortar inventory delivery. Kudos to Walmart, Target, and Home Depot for seeing what was coming.
        quickthrower2 6y ago
        One way to outdo amazon in your niche is a better user experience. It’s not to hard seeing how bad amazons ux is. You need to attract people who value trust over pure price.
        ethbr0 6y ago
        At some point, rubber meets physical road though. You can't offer 2 day shipping, if your supply chain doesn't support it profitably. Amazon's genius was leveraging marketplace and FBA to scale the logistics they also used (gee, kinda like AWS) while taking a cut.
        quickthrower2 6y ago
        Well that's market segmentation. Some people want it to come quick. Others care about other things. I doubt 100% of people place 100% priority on delivery speed. In particular, I personally don't use Amazon much. Granted not in the US so maybe the site is different etc. But to me they are like an 'ebay' in terms of my trust in what they deliver, when sometimes I want a 'department store'. Now not everyone is like me but I suspect enough people are that Amazon isn't going to take over all shopping.
        gogopuppygogo 6y ago
        If you think Amazon is bad try buying women’s clothes online from a discount retailer. Amazon puts them all to shame.
    - skybrian 6y ago
      It seems like Walmart has made pretty major investments?
  - gogopuppygogo 6y ago
    Keeping my eye on secondaries becoming available for cloud kitchens. Travis seems to have nailed where the industry sill rebound. Small owners will lose their entire business in this pandemic and then get started again leasing a space and relying on delivery apps to serve customers. Seems like a major disruptor.
    - nugget 6y ago
      Same here. I think most of the logistical overhead of a traditional small restaurant will be commoditized and abstracted away by cloud kitchen providers, a marketing/rewards layer, and delivery companies. The barriers to entry will come down, but competition will increase and margins may decrease. We'll be left with fewer "restauranteurs" and more chefs who can sit in the cockpit and simply plan and execute on menus. Since physical location is no longer a moat and menus are easily replicated, they will have to compete and win on brand. It will be interesting to see the margins on delivery-only versus indoor dining once the pandemic is behind us.
  - ethbr0 6y ago
    > And it feels like the disruption can happen faster now; like nobody is safe^ ^ in industries that meet the following criteria: - Customer base has always-on internet connectivity - Integration points into meat space are already digitized - Is not regulated, or is regulated in such a way that regulations can be ignored / externalized
  - deleted 6y ago
    [deleted]
  - birdyrooster 6y ago
    Ahh yes the future where we've already priced in the destruction of our planet due to global warming but somehow the valuations keep increasing. But I am ranting again... as for Tesla... It's all this frothy fed money and Elon, the guy steering the damned ship, doesn't even think the value is warranted. He's been saying for a year that the company literally cannot live up to the hype and the price will need to correct. I think investors are going to lose out big and Elon is going to look like the bad guy. After all, he kept irresponsibly using the Reality Distortion Field Generator which Jobs, peace be upon him, left him in his estate. In the year 2017, Musk claimed that by 2019, the world would have cars that can drive itself while the passenger sleeps. He just didn't mention it would drive you into a highway divider head-on at 80mph. Damn these rants.
    - kjksf 6y ago
      "frothy fed money" doesn't explain anything because it doesn't seem to flow to companies that are other than Tesla. And you're mis-representing what Musk says or thinks. He tweeted, once, "the stock price is too high". That's it. It could have been a joke. It certainly doesn't imply that he doesn't think the value is unwarranted. As to "but Elon said..." blame game, here's Ford, in 2016, saying they'll have self driving cars in 2021: https://www.nytimes.com/2016/08/17/business/ford-promises-fleets-of-driverless-cars-within-five-years.html https://www.nytimes.com/2016/08/17/business/ford-promises-fl... Tesla just released FSD beta, capable of doing fully intervention-less drives (sometimes). What does Ford has today?
      - Muanh 6y ago
        Stock price to high could have been a reference to the future stock split.
      - deleted 6y ago
        [deleted]
    - nickik 6y ago
      What Elon actually said, if you would listen to him and not just over react to tweets as you seem to do, you would know that what he said was 'Tesla currently doesn't justify that stock price, you have to believe in its future execution' and he also added 'I believe we will get there and eventually the stock will be higher then it is now'. And its also funny that people relentlessly shit on Elon for the few predictions he has gotten wrong, and ignore all the correct predictions. Funny how that works when you constantly prove everybody wrong but nobody remembers all those idiots who were wrong. Elon himself says he is giving median outcome predictions, half of his predictions are assumed by him to be wrong. Also funny how one accident of a system that save countless lives is used to shit on him, but giving him credit for the countless lives that the system saved are ignored. You should reevaluate your priorities.
- fastball 6y ago
  > Is it overvalued or in a bubble Or neither...
blhack 6y ago
Is this because Tesla makes a lot more than just cars? My understanding is that Tesla is also a power infrastructure company.
- toomuchtodo 6y ago
  It’s (imho) because the market believes Tesla will continue to capture an ever increasing amount of auto sales market share, cannibalizing legacy automakers (while also enjoying higher margins from zero marginal cost products such as Autopilot and also selling energy storage products [which are supply constrained and they can’t build fast enough, both at residential and utility scale]). Usual disclosure: TSLA investor, owner
- dragonwriter 6y ago
  It's because the market sees Tesla as having more growth potential inside and outside the auto industry than incumbent, largely steady-state automakers. It also has, I would bet without having actually done the comparison, much more stock market volatility than the overall industry, because assessment of Tesla's likely future state fluctuates a lot more than assessment of the likely future state of the incumbent major automakers.
- stmfreak 6y ago
  I suspect this adds to the hype. People comparing them to auto-manufacturers seem to willfully omit that Tesla is also a global auto sales dealership network, a global power storage company (grid power storage), a solar cell installer, sales and manufacturer, a battery manufacturer, and a global transportation power charging network (replacing gas stations). I’ve yet to read a comparison of Tesla to the sum of all those different markets.
- deleted 6y ago
  [deleted]
- MattGaiser 6y ago
  I am beginning to believe it might be worth that simply because other auto makers seem to be dragging their feet and getting into lousy deals (Nikola and GM being the most notable). If retail, grocery, hotels, restaurants, and other traditional industries are any indication, an inability to innovate is deeply entrenched to the point that even knowing that Amazon or Airbnb or DoorDash was coming to eat them, they did/do squat.
grecy 6y ago
The simple reason Tesla are valued so high is because they have plans for and are executing on MASSIVE growth. They're building factories around the world as fast as they possibly can to massively scale up how many cars they can produce each year. Toyota produce the same number of cars they did 10 years ago, and their stock price is the same as it was 10 years ago. Yes, Toyota make an insane number of vehicles and make profit doing so, but chances are they'll be doing basically the same thing 10 years from now. The article says Tesla's Revenue grew 28x in 10 years from 100M to 28B. The market is hoping/predicting/betting that will be the same in the next ten to roughly equal VW and Toyota at 280B by 2030. The ten years after that might see similar growth too..
- dawnerd 6y ago
  That's how I've been looking at it too. Yes, Tesla is overvalued right now but we don't know yet what their actual potential is since they can't keep up with demand. It's likely the valuation is completely unrealistic in the long term. Other EV manufacturers are also seeing pretty fantastic stock growth as well.
  - grecy 6y ago
    Also it helps they're the only auto manufacturer building EVs at scale, and more and more jurisdictions around the world are passing laws to ban the sales of ICE vehicles from 2030 onward.
new_realist 6y ago
It’s a bubble driven by exuberance and extreme government financial stimulus. It’s like pets.com, Worldcom, AOL, BlackBerry, etc.
- jti107 6y ago
  exactly! their electric drive train is fantastic but their build quality is subpar for a $35K+ vehicle. all the other portions of their business like autonomous driving and solar are negligible relative to their car business. the only explanation is that there is a ton of capital and people have no clue where to put it so they are investing like wallstreetbets.
- WillPostForFood 6y ago
  And low interest rates (part of government stimulus). It feels like a bubble to me too, but on the other hand, the failure of traditional car manufacturers to deliver electric cars leaves the possibility open that Tesla will be the next Toyota/GM.
  - deleted 6y ago
    [deleted]
  - gkfasdfasdf 6y ago
    This. It still seems like other carmakers are not taking EVs seriously, and are content to milk ICE vehicles to the very end.
    - clouddrover 6y ago
      No, it's just that Europe and China have the priority for the larger manufacturers because they have stricter fleet emissions standards. Volkswagen and Renault BEVs outsell Tesla in Europe, for example.
    - twblalock 6y ago
      On the contrary, most major brands have announced new electric and/or plug-in hybrid cars coming out in the next 5 years. That includes all of the major German brands, along with Ford and GM. The Big 3 Japanese brands (Toyota, Honda, and Nissan) already have some and are planning to build more. Altogether, those brands account for most of the global auto market.
maxdo 6y ago
it's a bet that tesla will convert their marketshare into real production numbers. The bet is based on assumption that entire market will shift to electric cars in 5-10 years. To give you understanding the current numbers. In 2020 tesla will deliver ~19% of what BMW delivers. BMW probably is the most direct traditional competitor. Luxury sport segment. 25% of audi and 5% of what toyota delivers. To keep this valuation assumption in place, tesla can lose a lot of market share and only "keep" 20%-30%. In this case it will outsold any other car brand and will outperform it's valuation. They could remain their share higher. In this case they are undervalued. They obviously can loose competition to traditional players, but also to emerging Chinese brands. Musk himself consider them a bigger competitor. The market itself can shirk a lot, due to robotization, in this case you don't have to own a car in most of the cases. In this case the entire market will be changed dramatically and current valuation doesn't make any sense.
- jariel 6y ago
  The other auto makers will make electrics cars and people will buy them. The magic ingredients at Tesla are just not that magic.
  - fastball 6y ago
    And yet not a single one of them was able to make electric cars attractive enough to buy until Tesla showed them the way.
    - brandonmenc 6y ago
      Just like Apple once showed everyone how to mass market a graphical OS, and then...
      - fastball 6y ago
        Apple became one of the largest companies on earth, with a mkt cap of 2T.
Tade0 6y ago
To me market cap is as meaningful as GDP - it doesn't represent real value, just whatever the market is willing to pay for an infinitesimal amount of shares, but extrapolated to the whole stock. Just how many company buy outs are done via cash?
omarforgotpwd 6y ago
Tesla designs chips, builds software, sells solar panels and home batteries, operates a global charging network, sells insurance, etc in addition to just manufacturing cars. It also sells and services its own cars, as opposed to the franchised dealership model under which most other OEMs operate. Therefore to make a fair comparison you'd have to add in the rest of the global automotive supply chain, not just the OEMs. Add in the valuations of all the dealers and retailers on Earth (some of which are publicly traded), add in Nvidia and other chip makers' automotive businesses, add in the market cap of Waymo, Cruise, Zoox and all those major hardware and software players that plan to compete with Tesla's Autopilot / FSD software. Add in the market cap of all the charging networks in China. In an apples to apples comparison Tesla's market cap would be less than one third of the global market.
- option 6y ago
  I think they make their own chips only for deployment/inference, not for training.
  - deleted 6y ago
    [deleted]
  - omarforgotpwd 6y ago
    Yeah, only the inference chips are in production in the car. They have a chip team in Austin which is lead by Pete Bannon, formerly of PA Semi (which Apple acquired to build their A series chips, and now their M series chips). The chips they designed are fabricated by Samsung in Austin. The "FSD Computer" that they have in their cars now has an Intel Atom board to run the user interface, and then dual arm SoCs to run the Autopilot stack. Each arm SoC has a special ASIC to hardware accelerate certain common neural net inference functions (I.e. dot products and other matrix math).
  - xiphias2 6y ago
    They are working on training chip as well codenamed Dojo. Elon is thinking of offering it as a cloud service, just like Google’s TPU service.
- 6y ago
1helloworld1 6y ago
Another mini dot-com bubble in the making. Anybody remember when Cisco became the most valuable company in the world? I don't, and I am pretty sure a lot of young investors in their 20s and 30s don't. This phenomenon is nothing new. Issac Newton, after losing 3 million dollars (in today's valuations)- "I Can Calculate the Motions of the Planets, but I Cannot Calculate the Madness of Men".
- elevenoh 6y ago
  Most of the income statements / ratios were a whole lot worse in 1999/2000
bobberkarl 6y ago
Something most underreport right now is the way we buy stocks fundamentally changed. The money flow used to be pension fund - > some middle men - > financial assets. Now it is consumer on an app - > financial asset. While I do not think `app traders` account for a huge chunk of investments, I still think more people are now shopping for stocks as consumers and not as traditional investors. People are picking stocks like they were goods. And they seldom move the markets. Tesla as a brand is loved. The love for that brand transpires to the stock You add to that the poor yield on nation bonds, the volatility, the multiple billions pulling out of the dollar, the value of city center real estate crumbling with WFH... there is a lot of money in the market right now. It's time to build. .
- texasbigdata 6y ago
  Is this true on a $ weighted basis? Makes total sense as % of total traders over a X period long session. Presumably Blackrock and Vanguard have longer hold times, therefore at the margin the price movement is driven more by infrequent traders. However, are day traders really "the market" now? Haven't kept up.
pxeboot 6y ago
I am not so sure Tesla is overvalued. Oil prices are not going to be this low forever, and I expect a massive increase in demand for electric vehicles once gas goes above $4/gallon again. Plus, millennials seem to greatly prefer the Tesla buying experience over traditional dealerships.
- wegs2 6y ago
  My hypothesis is different. Margins. GM, Ford, Honda, Toyota, etc. are competing with a commodity product in a commodity market. There's no big difference between a Toyota Yaris, a Honda Fit, a Kia Rio, a Ford Fiesta, and similar cars from every other brand. They're all within a few hundred bucks of $15k. They all cost do the same thing, cost the same to produce, and I imagine the margins are razor-thin. If any of the brand could lower prices by $500, they'd own the market. Tesla sells a unique product, with unique technologies. If Tesla has 5% of the market, but 10x the margins of its competitors, which doesn't seem an unlikely outcome: 1) Its profits will be roughly 1/3 of the total profits of the whole market 2) It will be much more stable. Razor-thin margins mean companies go bankrupt with even minor instability. If Ford's costs rise by 5%, it's dead. If Tesla's costs go up 5%, it's a almost a rounding error. I think the key question is whether Tesla can execute, but right now, things look promising, although far from certain.
  - DrJokepu 6y ago
    That’s not really how it is though, these are very different companies with very different products. For example, Ford makes its money on trucks. An F-150 has very healthy profit margins. It’s believed that Ford’s truck business is in fact worth more than Ford as a whole [1]. The Fiesta hasn’t been sold in the US since 2019. [1] https://www.cnbc.com/2018/03/14/fords-f-150-truck-franchise-alone-is-worth-more-than-the-whole-company-morgan-stanley.html https://www.cnbc.com/2018/03/14/fords-f-150-truck-franchise-...
    - stickfigure 6y ago
      That is likely due to the Chicken Tax: https://en.wikipedia.org/wiki/Chicken_tax https://en.wikipedia.org/wiki/Chicken_tax With a little sanity, luck, and changing political winds, it could disappear in an instant.
Animats 6y ago
Total car production worldwide, 2019: 92 million. Tesla car production (2020) about 600,000 (?) So Tesla makes around 0.7% of the world's cars. Something is wrong here.
- skissane 6y ago
  The stock price is built on the expectation that the 0.7% is going to quickly grow to a lot more. If that expectation holds, the current high price may be sustainable. If it becomes clear that it won’t, there will be a big sell-off
  - xiphias2 6y ago
    Even if Tesla does everything great there will be irrational exuberance and selloff: to compensate for the high growth of the company, the volatility has to be much higher for than a traditional car company.
- house9-2 6y ago
  Tesla is making big investments in building factories, both for cars and batteries. Those numbers should increase significantly over next 5 years. They have more vertical integration, less reliance on suppliers. They own their 'dealership', charging network and are also getting into auto insurance. Also, residential solar and energy storage. Oh yeah and they are getting into mining as well to ensure they can keep up the battery production. How many of those 92 million cars are EV? Tesla isn't really in competition with ICE car production - the next ten years is all about EV production and legacy car makers are off the back.
- WillPostForFood 6y ago
  I agree Tesla is overvalued, but try looking at it this way. There are cars, and electric cars. They are separate, and you shouldn't mix the numbers. Care are obsolete, and will be gone in the future. Maybe soon depending on the global fear level around climate change. Cars are the horse and buggy market. Electric Vehicles are the entirety of the future car market. If you have 0% of the horse and buggy/car market today, but have over 50% of the electric car market, you are very well positioned for the future. I'm exaggerating. The horse and buggy analogy is flawed (VW, BMW, GM, Ford, Toyota, Honda, etc are all real electric car competitors). But just looking at Tesla vs the petroleum car market is also flawed. The reality is in the middle, with Tesla well positioned to be a top electric car manufacturer, but not to dominate the market.
deleted 6y ago
[deleted]
Gustomaximus 6y ago
I assume the high value is more about Tesla being more than a car company. 1) If they win the self driving race that will be incredible value beyond just manufacturing cars. 2) Battery manufacturing in general is huge on its own. 3) The roof top combined with domestic battery side is potentially significant in replacing (full or part?) domestic power companies 4) Insurance - Musk said this could grow into 30-40% of their business 5) Super charger network gives them a first advantage to replace petrol stations to a degree. 6) Elon factor of what's next. And dont get me wrong, I do feel its gone beyond reasonable value, but there is more than a car company there.
- anonu 6y ago
  They may also buy SpaceX
- neogodless 6y ago
  This gave me chills. If I understand this correctly, they'll be able to write their own checks because they will essentially... 1) Own self-driving and thus, most personal transportation 3) Own / replace a large segment of public utility / power companies 4) Own / replace a large segment of insurance 5) Own / replace transportation power network Right now, it's silly to think of Tesla as some kind of mega-monopoly across industries. So we invest in them betting on them becoming that. Is that what we want? My counter-argument is that one of the bigger markets for automobiles, the U.S., is designed around personal choice, personal autonomy, etc. Many people just want a working car to give them freedom, and will buy whatever popular, trusted brand is available. The rest want one of the smaller brands, something that seems different from the mainstream (even if it's really barely skin deep). That has kept quite a few big players in the automotive marketplace, and despite consolidation over time, there's still variety, which buyers want. This argument really only addresses them as a car maker, though... and not at all for their spread across industry lines.
  - sandspar 6y ago
    Something will stop them. They're not expanding into a vacuum: they're expanding into well-established markets full of billion dollar companies run by people just as driven and talented as they are - not to mention other forces like governments, supply and demand etc. Look at someone who eats 5,000 calories a day and gains 3 lbs a week. "My god, in 10 years they'll weigh 10,000 lbs!"
ogre_codes 6y ago
Back in April during the early pandemic dip, I bought some shares in Tesla and watched them skyrocket. Sold a good chunk of the shares and watched them double again. I owned Tesla previously at around $200/ share and regrettably sold those shares. Tesla is tough to value, but I hang onto my shares for a few reasons. #1 I've profited enough that I've been able to cash out my original stake. Right now any investment in Tesla is house money. #2 Tesla is in a fairly unique position to gain from a lot of strong trends right now. Electric cars are just part of it. Tesla has their hands in a lot of the technology required for green power. Energy storage, solar, Tesla has their hands in it all. We're at the beginning of the curve on almost all of these technologies and Tesla has a pretty strong competitive advantage. #3 Elon Musk. I'm not a fan of many of the things he says and does, but he seems to have a talent for coming out on top and being ahead of the technology curve. I would honestly prefer owning SpaceX to Tesla, but since Tesla is the only Musk company which is public, I'm content with a piece of it. #4 Cars. The idea that VW/ GM/ Ford would leap frog Tesla once they started competing hasn't happened. Almost all the Tesla competitors either have far lower ranges, higher prices, or sometimes both. I have no idea if Tesla is worth 1/3 of what the rest of the auto industry is worth. But a giant chunk of auto industry infrastructure is going to be obsolete within the next 30 years even as Tesla is perched to continue growing so perhaps this isn't too odd.
remote_phone 6y ago
Tesla has lost market share in Europe and North America. To give a company $600B market cap and up 5x while it is losing market cap is pretty astounding to me.
RivieraKid 6y ago
The stock price increased by 15x in 1.5 years on basically no major news. If you don't include profits from regulatory credits, they've lost over $700M so far this year. Government money is not scalable or sustainable, so this an important indicator of how their finances are doing. The intuition is that Tesla cars are like iPhones. I think it's wrong. This is a low-margin business, where you increasingly compete with all of the goods and services people buy, like housing, education, healthcare. It's not a "buy a new phone for Christmas every 2 years" business. People are on the phone all the time, so paying $200 more for an improved experience for several hours per day is justified. But paying $5k or $10k more for an improved experience for 1 or 2 hours per day? If you're rich, maybe. If not, why not move closer to your work instead, so you don't have to use the car? Why not take a longer vacation, or eat out every day, or retire earlier, or pay for your kid's college education?
- grecy 6y ago
  > on basically no major news I think the evidence proves otherwise. It's the other automakers that have had no news. 1. They announced and are rapidly building a factory in China 2. They announced the Cybertruck, and are rapidly building a factory in Texas to build it. 3. They held "battery day" where they deep dived into how they're streamlining the production of cells to crack the $100/Kwh mark 4. Factory in China is now building over 20k vehicles/month.
  - RivieraKid 6y ago
    1, 2 and 4 were expected and incorporated in the price, 3 was a nothingburger. A good valuation takes into account the risk that anything which is expected fails for some reason, so when the expected stuff happens, it should increase the valuation by removing the risk. But it's never a game changer that should increase the valuation by a factor of 15.
    - LanceJones 6y ago
      According to whom? Anyone who understands battery density, costs, and scaling production certainly wouldn't agree with your "assessment".
uyt 6y ago
Market cap arguments lost me a lot of money. I wonder if there's just some flaw with this line of reasoning or I'm just unlucky and the market is too bubbly/irrational right now. For example another weird stock is Snowflake, which is currently at 100B but they themselves claim their total addressable market size is only 70B. Ditto for airbnb and doordash.
- christophilus 6y ago
  You’re not wrong, but shorting in a frothy market is a tough, tough game.
- SwagityMcSwag 6y ago
  Isn't total addressable market size an annual figure while market cap is not time bound?
HALtheWise 6y ago
Everyone is looking at these sort of headlines and being surprised at how high Tesla's valuation is, but I find it equally interesting as a sign of how low all the other automakers' valuations are. In that light, one hypothesis is that other automakers have pretty convincingly demonstrated that they are not able to sell significant numbers of cars at large profit margins, dooming them to perpetually hover slightly above or below breakeven depending on whether the economy is growing or in recession. Tesla hasn't proven they can do this, but they are unique among automakers in at least _not_ proving they _can't_, leaving open the potential of growing into an Apple-like position of commanding the majority of the profit in their industry, even if only a minority of sales. Ford's success with the F-150 line might be an exception here, but the pickup truck market will always be much smaller than the rest of the automobile market.
- neogodless 6y ago
  I assume you may be talking globally. In the U.S.[0] trucks are about a fifth of sales, crossovers are two fifths, and SUVs are just under a fifth. Cars like the Model 3 and Nissan Leaf fall into the "midsized car" category which is about a tenth of sales. So watching the Model Y is probably a better indicator for the long-term growth of Tesla, and there's plenty of competition. Just as a data point... GM's 15% profit margin[1]. [0] https://www.statista.com/statistics/276506/change-in-us-car-demand-by-vehicle-type/ https://www.statista.com/statistics/276506/change-in-us-car-... [1] https://www.cfo.com/financial-performance/2020/11/gm-posts-4b-profit-on-strong-truck-suv-sales/ https://www.cfo.com/financial-performance/2020/11/gm-posts-4...
- babesh 6y ago
  Ford and GM have massive amounts of debt. https://finance.yahoo.com/news/ford-motors-debt-overview-120757629.html https://finance.yahoo.com/news/ford-motors-debt-overview-120... Ford is at 142B net debt. So if you add the debt to the market cap, you get about 177B. https://m.benzinga.com/article/16826282 https://m.benzinga.com/article/16826282 GM is around 88B net debt. Add to market cap to get 148B. Tesla is probably close to 0 net with the latest raise. https://finance.yahoo.com/news/teslas-debt-overview-120614517.html https://finance.yahoo.com/news/teslas-debt-overview-12061451...
cambalache 6y ago
10 or so years ago I was pretty bearish on Facebook and Apple, I was proved wrong.As I said in another thread, this is the big question for the next 10 years in the automotive industry.Will TSLA justify its market cap?
- machiaweliczny 6y ago
  IMO car market is too strategic and well recognised so, so I doubt tesla will be very popular in EU for example. Their only way is premium market (ala Apple), probably same in China, so what's left is US and battery IP (which China will borrow)
flgb 6y ago
And how much the global energy market, which they are also disrupting?
kirillzubovsky 6y ago
It's interesting to see that most comments look at Tesla based on their fundamentals, some kind of analysis of their currents financials vs. expected future financials. This is sound, if you are hoping to get 12% returns, but I think stock market today is more about expected returns measured in 100x multipliers. Money is cheap, so it makes all the sense to buy risky assets. What has the best chance at growth, Tesla or BWM, Airbnb or Hilton ...and so on. Tesla could be overvalued by 100x, and be still undervalued because its expected growth is still much higher than that of your other alternatives. At the end of the day, Tesla futuristic, exciting, and keeps innovating. Every one else is just playing catch up. What is more likely, old school car companies learn to innovate, or Tesla learns to produce cars with less defects and for less? They seem like equally likely, but one is a much harder problem than the other as it is rooted in the very origins and goals of the company.
- nappy 6y ago
  This is the sort of thing you read right before the bubble pops.
  - switch11 6y ago
    so true so true it is interesting to see all the justifications people are giving for Tesla's completely irrational valuation Solar Roof/Solar Energy -> Solar City was going bankrupt and had to be bought by Tesla to save Musk's cousins (Rive) and his ownership stake in Solar City Electric Cars -> Check out what is happening on Europe. People keep saying Tesla is doing very well in China, without understanding that Tesla has a very small share of China and BYD is the largest EV maker in China Battery Storage -> So something that is a very small share of Tesla revenues will magically one day become a massive business? It's one thing to say - It will add $50 billion to the company Completely different thing to say it will add half a trillion Self Driving and Robotaxis - This has been the dream for the last 5 years Tesla said 1 million robotaxis by end of Dec 2020 Where are they? The combination of messianic leader who claims he is doing it only to save the planet and the human race combined with Fed printing money like its going out of fashion and investors desperate for returns Is a very dangerous combination
babesh 6y ago
I invested because I think their vision and execution will lead to them selling a ton of products and services. Their vision is much bigger than the auto industry. It is to accelerate the world’s transition to sustainable energy. I like their execution so far with the model 3, model y, and their focus on making a ton of batteries efficiently. They seem to be one of the most innovative companies in the world: superchargers, solar roofs, power walls, energy storage, electric cars, self driving cars, etc... and their innovation seems to be based on inventing on principle as coined by Bret Victor. The environment may be in flux with the financial markets frothy and governments are devaluing money, but I sure like this company’s prospects. I assign them many multiples over GM, Ford, etc... In the last 10 years, Tesla has started selling energy storage, power walls, solar roofs, etc.. . What have Ford and GM done in the same timeframe? Project out relative innovation rates over the next 5-10 years.
- ramraj07 6y ago
  If you have any idea what you're doing in terms of investing in any faint sense of traditionally formal rigor, you'd not touch Tesla with a tent pole no matter what you "believe" it's growth potential is. It's orders of magnitude away from any sensible by the books calculation on what Tesla's valuation should be. Just concede that you invested because you felt like it. It's probably okay, you very well might end up making a ton, and honestly who's to say the traditional methods are correct or are even applicable in 2020? But let's not kid ourselves trying to justify Tesla's value using traditional metrics.
  - babesh 6y ago
    ^ specialist in straw man arguments found solely in your own head https://www.macrotrends.net/stocks/charts/AMZN/amazon/pe-ratio https://www.macrotrends.net/stocks/charts/AMZN/amazon/pe-rat...
    - deckard1 6y ago
      ...you're really going to compare Amazon at 91 P/E to Tesla at 1224? And you think this is helping your argument, do you?
nickik 6y ago
What people don't seem to understand is that the market for EV is fundamentally limited by batteries. We know about how many batteries will be produced in the next 5-10 years. The EV market will grow as fast as the battery market can support it, and Tesla is by far the largest current buyer of batteries and they will continue to expand that. While at the same time also attempting to be one of the biggest battery companies in the world. The Tesla 'pilot plant' they have in California, is targeted to be the 15 biggest battery factory in the world by end of next year. Its the same size as the plant VW and Northvolt have planned in Germany by 2026. Tesla will in start building multiple huge battery factories next year, in Berlin and in Austin, Giga Nevada (biggest battery factory in the world, with Panasonic cooperation) will continue to grow and they will also continue to be one of the biggest costumers for LG and CATL. We are quickly at the point where the raw material inputs will have a seriously hard time keeping up. Massive amounts of new nickel, lithium, cobalt and battery grade graphite need to be minded and refined. Nickel is the best investment, as there is basically no way around massively increasing nickel in the next 10 years. This is before we even consider grid batteries. Li-Ion grid batteries, even when not able to be a backup for the cities are seriously useful for basically every grid operator in the world. While other storage mechanism exists, li-ion batteries are arguable the best in the market and will be for a long time. Tesla is already a serious contender in that market (largest market share by far) both in terms of home and grid batteries. They already have all the software and electronics required, and already are in contact with utilities around the world. People are very fast to claim 'bubble bubble bubble' but I would push people to seriously consider the market dynamics at play and how the transition EV and renewable energy will play out in the next 15 years. Tesla if you like them or not, is well positioned, in terms of EV, Grid Batteries and Solar installation, all of these will grow globally and exponentially over the next 10-15 years.

153 points by jonathanleane 6y ago

Hi guys - long time lurker, very seldom do I post or comment, but thought that HN might be interested in this. Although TSLA's market cap is down a bit from when I wrote the article, it still makes up something like 30% of the global automaker market, despite only publicly listing 10 years ago! Is it overvalued or in a bubble? I'll leave that for you to decide.

nugget 6y ago
Investors want to "buy the future" and seem to have placed an enormous premium on companies that are disruptive to the status quo. It's hard to say whether it's a bubble or not, because value is always part perception. I will say that the current period feels more disruptive than any I have lived through in the past (dot com 1.0, 2008-2009). And it feels like the disruption can happen faster now; like nobody is safe, and any older Fortune 1000 company can be rendered obsolete within a decade by a new startup.
- MattGaiser 6y ago
  And the existing companies companies do very little about their competition. I didn't invest in Amazon earlier as I thought the retailers would invest in trying to compete. Nope.
  - gogopuppygogo 6y ago
    Retailers are largely still not profitable with internet sales. Pre-pandemic a brick and mortar was doing about 5-10% via online and it was at best break even. Why would you invest money in something that was unprofitable when Amazon wasn’t even profitable for so long?
    - ethbr0 6y ago
      The problem most retailers face is that competing with Amazon requires substantial, multi-year capex into their supply chains. The more forward thinking realized that the catch-up bill was only going to get more expensive, as Amazon continued growing and optimizing. The less forward thinking... well, there's Sears. As consumers, we rarely see "how" free 2-day shipping, same day delivery, BOPIS, etc. But suffice it to say, it's very expensive to retool legacy supply chains optimized for brick and mortar inventory delivery. Kudos to Walmart, Target, and Home Depot for seeing what was coming.
      - quickthrower2 6y ago
        One way to outdo amazon in your niche is a better user experience. It’s not to hard seeing how bad amazons ux is. You need to attract people who value trust over pure price.
        ethbr0 6y ago
        At some point, rubber meets physical road though. You can't offer 2 day shipping, if your supply chain doesn't support it profitably. Amazon's genius was leveraging marketplace and FBA to scale the logistics they also used (gee, kinda like AWS) while taking a cut.
        quickthrower2 6y ago
        Well that's market segmentation. Some people want it to come quick. Others care about other things. I doubt 100% of people place 100% priority on delivery speed. In particular, I personally don't use Amazon much. Granted not in the US so maybe the site is different etc. But to me they are like an 'ebay' in terms of my trust in what they deliver, when sometimes I want a 'department store'. Now not everyone is like me but I suspect enough people are that Amazon isn't going to take over all shopping.
        gogopuppygogo 6y ago
        If you think Amazon is bad try buying women’s clothes online from a discount retailer. Amazon puts them all to shame.
  - skybrian 6y ago
    It seems like Walmart has made pretty major investments?
- gogopuppygogo 6y ago
  Keeping my eye on secondaries becoming available for cloud kitchens. Travis seems to have nailed where the industry sill rebound. Small owners will lose their entire business in this pandemic and then get started again leasing a space and relying on delivery apps to serve customers. Seems like a major disruptor.
  - nugget 6y ago
    Same here. I think most of the logistical overhead of a traditional small restaurant will be commoditized and abstracted away by cloud kitchen providers, a marketing/rewards layer, and delivery companies. The barriers to entry will come down, but competition will increase and margins may decrease. We'll be left with fewer "restauranteurs" and more chefs who can sit in the cockpit and simply plan and execute on menus. Since physical location is no longer a moat and menus are easily replicated, they will have to compete and win on brand. It will be interesting to see the margins on delivery-only versus indoor dining once the pandemic is behind us.
- ethbr0 6y ago
  > And it feels like the disruption can happen faster now; like nobody is safe^ ^ in industries that meet the following criteria: - Customer base has always-on internet connectivity - Integration points into meat space are already digitized - Is not regulated, or is regulated in such a way that regulations can be ignored / externalized
- deleted 6y ago
  [deleted]
- birdyrooster 6y ago
  Ahh yes the future where we've already priced in the destruction of our planet due to global warming but somehow the valuations keep increasing. But I am ranting again... as for Tesla... It's all this frothy fed money and Elon, the guy steering the damned ship, doesn't even think the value is warranted. He's been saying for a year that the company literally cannot live up to the hype and the price will need to correct. I think investors are going to lose out big and Elon is going to look like the bad guy. After all, he kept irresponsibly using the Reality Distortion Field Generator which Jobs, peace be upon him, left him in his estate. In the year 2017, Musk claimed that by 2019, the world would have cars that can drive itself while the passenger sleeps. He just didn't mention it would drive you into a highway divider head-on at 80mph. Damn these rants.
  - kjksf 6y ago
    "frothy fed money" doesn't explain anything because it doesn't seem to flow to companies that are other than Tesla. And you're mis-representing what Musk says or thinks. He tweeted, once, "the stock price is too high". That's it. It could have been a joke. It certainly doesn't imply that he doesn't think the value is unwarranted. As to "but Elon said..." blame game, here's Ford, in 2016, saying they'll have self driving cars in 2021: https://www.nytimes.com/2016/08/17/business/ford-promises-fleets-of-driverless-cars-within-five-years.html https://www.nytimes.com/2016/08/17/business/ford-promises-fl... Tesla just released FSD beta, capable of doing fully intervention-less drives (sometimes). What does Ford has today?
    - Muanh 6y ago
      Stock price to high could have been a reference to the future stock split.
    - deleted 6y ago
      [deleted]
  - nickik 6y ago
    What Elon actually said, if you would listen to him and not just over react to tweets as you seem to do, you would know that what he said was 'Tesla currently doesn't justify that stock price, you have to believe in its future execution' and he also added 'I believe we will get there and eventually the stock will be higher then it is now'. And its also funny that people relentlessly shit on Elon for the few predictions he has gotten wrong, and ignore all the correct predictions. Funny how that works when you constantly prove everybody wrong but nobody remembers all those idiots who were wrong. Elon himself says he is giving median outcome predictions, half of his predictions are assumed by him to be wrong. Also funny how one accident of a system that save countless lives is used to shit on him, but giving him credit for the countless lives that the system saved are ignored. You should reevaluate your priorities.
fastball 6y ago
> Is it overvalued or in a bubble Or neither...

blhack 6y ago

Is this because Tesla makes a lot more than just cars? My understanding is that Tesla is also a power infrastructure company.

toomuchtodo 6y ago
It’s (imho) because the market believes Tesla will continue to capture an ever increasing amount of auto sales market share, cannibalizing legacy automakers (while also enjoying higher margins from zero marginal cost products such as Autopilot and also selling energy storage products [which are supply constrained and they can’t build fast enough, both at residential and utility scale]). Usual disclosure: TSLA investor, owner
dragonwriter 6y ago
It's because the market sees Tesla as having more growth potential inside and outside the auto industry than incumbent, largely steady-state automakers. It also has, I would bet without having actually done the comparison, much more stock market volatility than the overall industry, because assessment of Tesla's likely future state fluctuates a lot more than assessment of the likely future state of the incumbent major automakers.
stmfreak 6y ago
I suspect this adds to the hype. People comparing them to auto-manufacturers seem to willfully omit that Tesla is also a global auto sales dealership network, a global power storage company (grid power storage), a solar cell installer, sales and manufacturer, a battery manufacturer, and a global transportation power charging network (replacing gas stations). I’ve yet to read a comparison of Tesla to the sum of all those different markets.
deleted 6y ago
[deleted]
MattGaiser 6y ago
I am beginning to believe it might be worth that simply because other auto makers seem to be dragging their feet and getting into lousy deals (Nikola and GM being the most notable). If retail, grocery, hotels, restaurants, and other traditional industries are any indication, an inability to innovate is deeply entrenched to the point that even knowing that Amazon or Airbnb or DoorDash was coming to eat them, they did/do squat.

grecy 6y ago

The simple reason Tesla are valued so high is because they have plans for and are executing on MASSIVE growth. They're building factories around the world as fast as they possibly can to massively scale up how many cars they can produce each year. Toyota produce the same number of cars they did 10 years ago, and their stock price is the same as it was 10 years ago. Yes, Toyota make an insane number of vehicles and make profit doing so, but chances are they'll be doing basically the same thing 10 years from now. The article says Tesla's Revenue grew 28x in 10 years from 100M to 28B. The market is hoping/predicting/betting that will be the same in the next ten to roughly equal VW and Toyota at 280B by 2030. The ten years after that might see similar growth too..

dawnerd 6y ago
That's how I've been looking at it too. Yes, Tesla is overvalued right now but we don't know yet what their actual potential is since they can't keep up with demand. It's likely the valuation is completely unrealistic in the long term. Other EV manufacturers are also seeing pretty fantastic stock growth as well.
- grecy 6y ago
  Also it helps they're the only auto manufacturer building EVs at scale, and more and more jurisdictions around the world are passing laws to ban the sales of ICE vehicles from 2030 onward.

new_realist 6y ago

It’s a bubble driven by exuberance and extreme government financial stimulus. It’s like pets.com, Worldcom, AOL, BlackBerry, etc.

jti107 6y ago
exactly! their electric drive train is fantastic but their build quality is subpar for a $35K+ vehicle. all the other portions of their business like autonomous driving and solar are negligible relative to their car business. the only explanation is that there is a ton of capital and people have no clue where to put it so they are investing like wallstreetbets.
WillPostForFood 6y ago
And low interest rates (part of government stimulus). It feels like a bubble to me too, but on the other hand, the failure of traditional car manufacturers to deliver electric cars leaves the possibility open that Tesla will be the next Toyota/GM.
- deleted 6y ago
  [deleted]
- gkfasdfasdf 6y ago
  This. It still seems like other carmakers are not taking EVs seriously, and are content to milk ICE vehicles to the very end.
  - clouddrover 6y ago
    No, it's just that Europe and China have the priority for the larger manufacturers because they have stricter fleet emissions standards. Volkswagen and Renault BEVs outsell Tesla in Europe, for example.
  - twblalock 6y ago
    On the contrary, most major brands have announced new electric and/or plug-in hybrid cars coming out in the next 5 years. That includes all of the major German brands, along with Ford and GM. The Big 3 Japanese brands (Toyota, Honda, and Nissan) already have some and are planning to build more. Altogether, those brands account for most of the global auto market.

maxdo 6y ago

it's a bet that tesla will convert their marketshare into real production numbers. The bet is based on assumption that entire market will shift to electric cars in 5-10 years. To give you understanding the current numbers. In 2020 tesla will deliver ~19% of what BMW delivers. BMW probably is the most direct traditional competitor. Luxury sport segment. 25% of audi and 5% of what toyota delivers. To keep this valuation assumption in place, tesla can lose a lot of market share and only "keep" 20%-30%. In this case it will outsold any other car brand and will outperform it's valuation. They could remain their share higher. In this case they are undervalued. They obviously can loose competition to traditional players, but also to emerging Chinese brands. Musk himself consider them a bigger competitor. The market itself can shirk a lot, due to robotization, in this case you don't have to own a car in most of the cases. In this case the entire market will be changed dramatically and current valuation doesn't make any sense.

jariel 6y ago
The other auto makers will make electrics cars and people will buy them. The magic ingredients at Tesla are just not that magic.
- fastball 6y ago
  And yet not a single one of them was able to make electric cars attractive enough to buy until Tesla showed them the way.
  - brandonmenc 6y ago
    Just like Apple once showed everyone how to mass market a graphical OS, and then...
    - fastball 6y ago
      Apple became one of the largest companies on earth, with a mkt cap of 2T.

Tade0 6y ago

To me market cap is as meaningful as GDP - it doesn't represent real value, just whatever the market is willing to pay for an infinitesimal amount of shares, but extrapolated to the whole stock. Just how many company buy outs are done via cash?

omarforgotpwd 6y ago

Tesla designs chips, builds software, sells solar panels and home batteries, operates a global charging network, sells insurance, etc in addition to just manufacturing cars. It also sells and services its own cars, as opposed to the franchised dealership model under which most other OEMs operate. Therefore to make a fair comparison you'd have to add in the rest of the global automotive supply chain, not just the OEMs. Add in the valuations of all the dealers and retailers on Earth (some of which are publicly traded), add in Nvidia and other chip makers' automotive businesses, add in the market cap of Waymo, Cruise, Zoox and all those major hardware and software players that plan to compete with Tesla's Autopilot / FSD software. Add in the market cap of all the charging networks in China. In an apples to apples comparison Tesla's market cap would be less than one third of the global market.

option 6y ago
I think they make their own chips only for deployment/inference, not for training.
- deleted 6y ago
  [deleted]
- omarforgotpwd 6y ago
  Yeah, only the inference chips are in production in the car. They have a chip team in Austin which is lead by Pete Bannon, formerly of PA Semi (which Apple acquired to build their A series chips, and now their M series chips). The chips they designed are fabricated by Samsung in Austin. The "FSD Computer" that they have in their cars now has an Intel Atom board to run the user interface, and then dual arm SoCs to run the Autopilot stack. Each arm SoC has a special ASIC to hardware accelerate certain common neural net inference functions (I.e. dot products and other matrix math).
- xiphias2 6y ago
  They are working on training chip as well codenamed Dojo. Elon is thinking of offering it as a cloud service, just like Google’s TPU service.
6y ago

1helloworld1 6y ago

Another mini dot-com bubble in the making. Anybody remember when Cisco became the most valuable company in the world? I don't, and I am pretty sure a lot of young investors in their 20s and 30s don't. This phenomenon is nothing new. Issac Newton, after losing 3 million dollars (in today's valuations)- "I Can Calculate the Motions of the Planets, but I Cannot Calculate the Madness of Men".

elevenoh 6y ago
Most of the income statements / ratios were a whole lot worse in 1999/2000

bobberkarl 6y ago

Something most underreport right now is the way we buy stocks fundamentally changed. The money flow used to be pension fund - > some middle men - > financial assets. Now it is consumer on an app - > financial asset. While I do not think `app traders` account for a huge chunk of investments, I still think more people are now shopping for stocks as consumers and not as traditional investors. People are picking stocks like they were goods. And they seldom move the markets. Tesla as a brand is loved. The love for that brand transpires to the stock You add to that the poor yield on nation bonds, the volatility, the multiple billions pulling out of the dollar, the value of city center real estate crumbling with WFH... there is a lot of money in the market right now. It's time to build. .

texasbigdata 6y ago
Is this true on a $ weighted basis? Makes total sense as % of total traders over a X period long session. Presumably Blackrock and Vanguard have longer hold times, therefore at the margin the price movement is driven more by infrequent traders. However, are day traders really "the market" now? Haven't kept up.

pxeboot 6y ago

I am not so sure Tesla is overvalued. Oil prices are not going to be this low forever, and I expect a massive increase in demand for electric vehicles once gas goes above $4/gallon again. Plus, millennials seem to greatly prefer the Tesla buying experience over traditional dealerships.

wegs2 6y ago
My hypothesis is different. Margins. GM, Ford, Honda, Toyota, etc. are competing with a commodity product in a commodity market. There's no big difference between a Toyota Yaris, a Honda Fit, a Kia Rio, a Ford Fiesta, and similar cars from every other brand. They're all within a few hundred bucks of $15k. They all cost do the same thing, cost the same to produce, and I imagine the margins are razor-thin. If any of the brand could lower prices by $500, they'd own the market. Tesla sells a unique product, with unique technologies. If Tesla has 5% of the market, but 10x the margins of its competitors, which doesn't seem an unlikely outcome: 1) Its profits will be roughly 1/3 of the total profits of the whole market 2) It will be much more stable. Razor-thin margins mean companies go bankrupt with even minor instability. If Ford's costs rise by 5%, it's dead. If Tesla's costs go up 5%, it's a almost a rounding error. I think the key question is whether Tesla can execute, but right now, things look promising, although far from certain.
- DrJokepu 6y ago
  That’s not really how it is though, these are very different companies with very different products. For example, Ford makes its money on trucks. An F-150 has very healthy profit margins. It’s believed that Ford’s truck business is in fact worth more than Ford as a whole [1]. The Fiesta hasn’t been sold in the US since 2019. [1] https://www.cnbc.com/2018/03/14/fords-f-150-truck-franchise-alone-is-worth-more-than-the-whole-company-morgan-stanley.html https://www.cnbc.com/2018/03/14/fords-f-150-truck-franchise-...
  - stickfigure 6y ago
    That is likely due to the Chicken Tax: https://en.wikipedia.org/wiki/Chicken_tax https://en.wikipedia.org/wiki/Chicken_tax With a little sanity, luck, and changing political winds, it could disappear in an instant.

Animats 6y ago

Total car production worldwide, 2019: 92 million. Tesla car production (2020) about 600,000 (?) So Tesla makes around 0.7% of the world's cars. Something is wrong here.

skissane 6y ago
The stock price is built on the expectation that the 0.7% is going to quickly grow to a lot more. If that expectation holds, the current high price may be sustainable. If it becomes clear that it won’t, there will be a big sell-off
- xiphias2 6y ago
  Even if Tesla does everything great there will be irrational exuberance and selloff: to compensate for the high growth of the company, the volatility has to be much higher for than a traditional car company.
house9-2 6y ago
Tesla is making big investments in building factories, both for cars and batteries. Those numbers should increase significantly over next 5 years. They have more vertical integration, less reliance on suppliers. They own their 'dealership', charging network and are also getting into auto insurance. Also, residential solar and energy storage. Oh yeah and they are getting into mining as well to ensure they can keep up the battery production. How many of those 92 million cars are EV? Tesla isn't really in competition with ICE car production - the next ten years is all about EV production and legacy car makers are off the back.
WillPostForFood 6y ago
I agree Tesla is overvalued, but try looking at it this way. There are cars, and electric cars. They are separate, and you shouldn't mix the numbers. Care are obsolete, and will be gone in the future. Maybe soon depending on the global fear level around climate change. Cars are the horse and buggy market. Electric Vehicles are the entirety of the future car market. If you have 0% of the horse and buggy/car market today, but have over 50% of the electric car market, you are very well positioned for the future. I'm exaggerating. The horse and buggy analogy is flawed (VW, BMW, GM, Ford, Toyota, Honda, etc are all real electric car competitors). But just looking at Tesla vs the petroleum car market is also flawed. The reality is in the middle, with Tesla well positioned to be a top electric car manufacturer, but not to dominate the market.

deleted 6y ago

[deleted]

Gustomaximus 6y ago

I assume the high value is more about Tesla being more than a car company. 1) If they win the self driving race that will be incredible value beyond just manufacturing cars. 2) Battery manufacturing in general is huge on its own. 3) The roof top combined with domestic battery side is potentially significant in replacing (full or part?) domestic power companies 4) Insurance - Musk said this could grow into 30-40% of their business 5) Super charger network gives them a first advantage to replace petrol stations to a degree. 6) Elon factor of what's next. And dont get me wrong, I do feel its gone beyond reasonable value, but there is more than a car company there.

anonu 6y ago
They may also buy SpaceX
neogodless 6y ago
This gave me chills. If I understand this correctly, they'll be able to write their own checks because they will essentially... 1) Own self-driving and thus, most personal transportation 3) Own / replace a large segment of public utility / power companies 4) Own / replace a large segment of insurance 5) Own / replace transportation power network Right now, it's silly to think of Tesla as some kind of mega-monopoly across industries. So we invest in them betting on them becoming that. Is that what we want? My counter-argument is that one of the bigger markets for automobiles, the U.S., is designed around personal choice, personal autonomy, etc. Many people just want a working car to give them freedom, and will buy whatever popular, trusted brand is available. The rest want one of the smaller brands, something that seems different from the mainstream (even if it's really barely skin deep). That has kept quite a few big players in the automotive marketplace, and despite consolidation over time, there's still variety, which buyers want. This argument really only addresses them as a car maker, though... and not at all for their spread across industry lines.
- sandspar 6y ago
  Something will stop them. They're not expanding into a vacuum: they're expanding into well-established markets full of billion dollar companies run by people just as driven and talented as they are - not to mention other forces like governments, supply and demand etc. Look at someone who eats 5,000 calories a day and gains 3 lbs a week. "My god, in 10 years they'll weigh 10,000 lbs!"

ogre_codes 6y ago

Back in April during the early pandemic dip, I bought some shares in Tesla and watched them skyrocket. Sold a good chunk of the shares and watched them double again. I owned Tesla previously at around $200/ share and regrettably sold those shares. Tesla is tough to value, but I hang onto my shares for a few reasons. #1 I've profited enough that I've been able to cash out my original stake. Right now any investment in Tesla is house money. #2 Tesla is in a fairly unique position to gain from a lot of strong trends right now. Electric cars are just part of it. Tesla has their hands in a lot of the technology required for green power. Energy storage, solar, Tesla has their hands in it all. We're at the beginning of the curve on almost all of these technologies and Tesla has a pretty strong competitive advantage. #3 Elon Musk. I'm not a fan of many of the things he says and does, but he seems to have a talent for coming out on top and being ahead of the technology curve. I would honestly prefer owning SpaceX to Tesla, but since Tesla is the only Musk company which is public, I'm content with a piece of it. #4 Cars. The idea that VW/ GM/ Ford would leap frog Tesla once they started competing hasn't happened. Almost all the Tesla competitors either have far lower ranges, higher prices, or sometimes both. I have no idea if Tesla is worth 1/3 of what the rest of the auto industry is worth. But a giant chunk of auto industry infrastructure is going to be obsolete within the next 30 years even as Tesla is perched to continue growing so perhaps this isn't too odd.

remote_phone 6y ago

Tesla has lost market share in Europe and North America. To give a company $600B market cap and up 5x while it is losing market cap is pretty astounding to me.

RivieraKid 6y ago

The stock price increased by 15x in 1.5 years on basically no major news. If you don't include profits from regulatory credits, they've lost over $700M so far this year. Government money is not scalable or sustainable, so this an important indicator of how their finances are doing. The intuition is that Tesla cars are like iPhones. I think it's wrong. This is a low-margin business, where you increasingly compete with all of the goods and services people buy, like housing, education, healthcare. It's not a "buy a new phone for Christmas every 2 years" business. People are on the phone all the time, so paying $200 more for an improved experience for several hours per day is justified. But paying $5k or $10k more for an improved experience for 1 or 2 hours per day? If you're rich, maybe. If not, why not move closer to your work instead, so you don't have to use the car? Why not take a longer vacation, or eat out every day, or retire earlier, or pay for your kid's college education?

grecy 6y ago
> on basically no major news I think the evidence proves otherwise. It's the other automakers that have had no news. 1. They announced and are rapidly building a factory in China 2. They announced the Cybertruck, and are rapidly building a factory in Texas to build it. 3. They held "battery day" where they deep dived into how they're streamlining the production of cells to crack the $100/Kwh mark 4. Factory in China is now building over 20k vehicles/month.
- RivieraKid 6y ago
  1, 2 and 4 were expected and incorporated in the price, 3 was a nothingburger. A good valuation takes into account the risk that anything which is expected fails for some reason, so when the expected stuff happens, it should increase the valuation by removing the risk. But it's never a game changer that should increase the valuation by a factor of 15.
  - LanceJones 6y ago
    According to whom? Anyone who understands battery density, costs, and scaling production certainly wouldn't agree with your "assessment".

uyt 6y ago

Market cap arguments lost me a lot of money. I wonder if there's just some flaw with this line of reasoning or I'm just unlucky and the market is too bubbly/irrational right now. For example another weird stock is Snowflake, which is currently at 100B but they themselves claim their total addressable market size is only 70B. Ditto for airbnb and doordash.

christophilus 6y ago
You’re not wrong, but shorting in a frothy market is a tough, tough game.
SwagityMcSwag 6y ago
Isn't total addressable market size an annual figure while market cap is not time bound?

HALtheWise 6y ago

Everyone is looking at these sort of headlines and being surprised at how high Tesla's valuation is, but I find it equally interesting as a sign of how low all the other automakers' valuations are. In that light, one hypothesis is that other automakers have pretty convincingly demonstrated that they are not able to sell significant numbers of cars at large profit margins, dooming them to perpetually hover slightly above or below breakeven depending on whether the economy is growing or in recession. Tesla hasn't proven they can do this, but they are unique among automakers in at least _not_ proving they _can't_, leaving open the potential of growing into an Apple-like position of commanding the majority of the profit in their industry, even if only a minority of sales. Ford's success with the F-150 line might be an exception here, but the pickup truck market will always be much smaller than the rest of the automobile market.

neogodless 6y ago
I assume you may be talking globally. In the U.S.[0] trucks are about a fifth of sales, crossovers are two fifths, and SUVs are just under a fifth. Cars like the Model 3 and Nissan Leaf fall into the "midsized car" category which is about a tenth of sales. So watching the Model Y is probably a better indicator for the long-term growth of Tesla, and there's plenty of competition. Just as a data point... GM's 15% profit margin[1]. [0] https://www.statista.com/statistics/276506/change-in-us-car-demand-by-vehicle-type/ https://www.statista.com/statistics/276506/change-in-us-car-... [1] https://www.cfo.com/financial-performance/2020/11/gm-posts-4b-profit-on-strong-truck-suv-sales/ https://www.cfo.com/financial-performance/2020/11/gm-posts-4...
babesh 6y ago
Ford and GM have massive amounts of debt. https://finance.yahoo.com/news/ford-motors-debt-overview-120757629.html https://finance.yahoo.com/news/ford-motors-debt-overview-120... Ford is at 142B net debt. So if you add the debt to the market cap, you get about 177B. https://m.benzinga.com/article/16826282 https://m.benzinga.com/article/16826282 GM is around 88B net debt. Add to market cap to get 148B. Tesla is probably close to 0 net with the latest raise. https://finance.yahoo.com/news/teslas-debt-overview-120614517.html https://finance.yahoo.com/news/teslas-debt-overview-12061451...

cambalache 6y ago

10 or so years ago I was pretty bearish on Facebook and Apple, I was proved wrong.As I said in another thread, this is the big question for the next 10 years in the automotive industry.Will TSLA justify its market cap?

machiaweliczny 6y ago
IMO car market is too strategic and well recognised so, so I doubt tesla will be very popular in EU for example. Their only way is premium market (ala Apple), probably same in China, so what's left is US and battery IP (which China will borrow)

flgb 6y ago

And how much the global energy market, which they are also disrupting?

kirillzubovsky 6y ago

It's interesting to see that most comments look at Tesla based on their fundamentals, some kind of analysis of their currents financials vs. expected future financials. This is sound, if you are hoping to get 12% returns, but I think stock market today is more about expected returns measured in 100x multipliers. Money is cheap, so it makes all the sense to buy risky assets. What has the best chance at growth, Tesla or BWM, Airbnb or Hilton ...and so on. Tesla could be overvalued by 100x, and be still undervalued because its expected growth is still much higher than that of your other alternatives. At the end of the day, Tesla futuristic, exciting, and keeps innovating. Every one else is just playing catch up. What is more likely, old school car companies learn to innovate, or Tesla learns to produce cars with less defects and for less? They seem like equally likely, but one is a much harder problem than the other as it is rooted in the very origins and goals of the company.

nappy 6y ago
This is the sort of thing you read right before the bubble pops.
- switch11 6y ago
  so true so true it is interesting to see all the justifications people are giving for Tesla's completely irrational valuation Solar Roof/Solar Energy -> Solar City was going bankrupt and had to be bought by Tesla to save Musk's cousins (Rive) and his ownership stake in Solar City Electric Cars -> Check out what is happening on Europe. People keep saying Tesla is doing very well in China, without understanding that Tesla has a very small share of China and BYD is the largest EV maker in China Battery Storage -> So something that is a very small share of Tesla revenues will magically one day become a massive business? It's one thing to say - It will add $50 billion to the company Completely different thing to say it will add half a trillion Self Driving and Robotaxis - This has been the dream for the last 5 years Tesla said 1 million robotaxis by end of Dec 2020 Where are they? The combination of messianic leader who claims he is doing it only to save the planet and the human race combined with Fed printing money like its going out of fashion and investors desperate for returns Is a very dangerous combination

babesh 6y ago

I invested because I think their vision and execution will lead to them selling a ton of products and services. Their vision is much bigger than the auto industry. It is to accelerate the world’s transition to sustainable energy. I like their execution so far with the model 3, model y, and their focus on making a ton of batteries efficiently. They seem to be one of the most innovative companies in the world: superchargers, solar roofs, power walls, energy storage, electric cars, self driving cars, etc... and their innovation seems to be based on inventing on principle as coined by Bret Victor. The environment may be in flux with the financial markets frothy and governments are devaluing money, but I sure like this company’s prospects. I assign them many multiples over GM, Ford, etc... In the last 10 years, Tesla has started selling energy storage, power walls, solar roofs, etc.. . What have Ford and GM done in the same timeframe? Project out relative innovation rates over the next 5-10 years.

ramraj07 6y ago
If you have any idea what you're doing in terms of investing in any faint sense of traditionally formal rigor, you'd not touch Tesla with a tent pole no matter what you "believe" it's growth potential is. It's orders of magnitude away from any sensible by the books calculation on what Tesla's valuation should be. Just concede that you invested because you felt like it. It's probably okay, you very well might end up making a ton, and honestly who's to say the traditional methods are correct or are even applicable in 2020? But let's not kid ourselves trying to justify Tesla's value using traditional metrics.
- babesh 6y ago
  ^ specialist in straw man arguments found solely in your own head https://www.macrotrends.net/stocks/charts/AMZN/amazon/pe-ratio https://www.macrotrends.net/stocks/charts/AMZN/amazon/pe-rat...
  - deckard1 6y ago
    ...you're really going to compare Amazon at 91 P/E to Tesla at 1224? And you think this is helping your argument, do you?

nickik 6y ago

What people don't seem to understand is that the market for EV is fundamentally limited by batteries. We know about how many batteries will be produced in the next 5-10 years. The EV market will grow as fast as the battery market can support it, and Tesla is by far the largest current buyer of batteries and they will continue to expand that. While at the same time also attempting to be one of the biggest battery companies in the world. The Tesla 'pilot plant' they have in California, is targeted to be the 15 biggest battery factory in the world by end of next year. Its the same size as the plant VW and Northvolt have planned in Germany by 2026. Tesla will in start building multiple huge battery factories next year, in Berlin and in Austin, Giga Nevada (biggest battery factory in the world, with Panasonic cooperation) will continue to grow and they will also continue to be one of the biggest costumers for LG and CATL. We are quickly at the point where the raw material inputs will have a seriously hard time keeping up. Massive amounts of new nickel, lithium, cobalt and battery grade graphite need to be minded and refined. Nickel is the best investment, as there is basically no way around massively increasing nickel in the next 10 years. This is before we even consider grid batteries. Li-Ion grid batteries, even when not able to be a backup for the cities are seriously useful for basically every grid operator in the world. While other storage mechanism exists, li-ion batteries are arguable the best in the market and will be for a long time. Tesla is already a serious contender in that market (largest market share by far) both in terms of home and grid batteries. They already have all the software and electronics required, and already are in contact with utilities around the world. People are very fast to claim 'bubble bubble bubble' but I would push people to seriously consider the market dynamics at play and how the transition EV and renewable energy will play out in the next 15 years. Tesla if you like them or not, is well positioned, in terms of EV, Grid Batteries and Solar installation, all of these will grow globally and exponentially over the next 10-15 years.