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I just fined the Tesla share price incredible hard to justify, I know they are a growing company with big ambitions but the numbers just don't work. Tesla: -

I just fined the Tesla share price incredible hard to justify, I know they are a growing company with big ambitions but the numbers just don't work. Tesla: - Market cap: $392.78 billion - Q3 units sold: 343,000 VW Group: - Market cap: $70.98 billion - Q3 units sold: 2,181,300 Obviously they are slightly different companies, Tesla sell solar and battery storage products. And VW Group have brands that sell to a part of the market that Tesla hasn't entered yet. However there is no way to look at those numbers and make it work. If you go with a market cap to sales ratio, Tesla investors and projecting sales of over 12 million per quarter to match VW... On VW, they have nearly reached 7% BEV sales, steadily growing. And those cars are well reviewed. Teslas "moat" is shrinking.

PaywallBuster 4y ago
Tesla fanboys claim Tesla is a vertically integrated company competing in different markets, hence having a huge TAM and higher chance for growth. Still!
- snovv_crash 4y ago
  There is something to this. If you include big chunks of Bosch, Siemens and all their other component providers in the VW market cap you would definitely get a more fair comparison to Tesla.
ErikHuisman 4y ago
You can't just look at mcap but forget to factor in debt. vwgroup $402.96B
- samwillis 4y ago
  Sure, and Tesla at $33.74B. But VWs debt is mostly due to them operating as a bank that sells loans to their customers to buy their cars. So it's more nuanced than just folding the into the calculation. Most other car manufactures don't do that directly. Point is that in broad strokes it doesn't add up.
  - repsilat 4y ago
    So Tesla's enterprise value is $426.5 billion and VW's is $473.9 billion? Regarding the "operating as a bank", are we talking about net debt? I'd guess that if VW loaned money to customers those loans would be assets, right? They wouldn't get the cash from the customer, but they'd get something that looks about as good for their balance sheet hopefully?
    - pas 4y ago
      right, but they get the financing for those loans from other banks or from the bond market. they can't just make cars from thin air after all :)
    - bryanlarsen 4y ago
      The Enterprise Value calculations subtract cash from debt to determine the net debt level. Most think you should also subtract customer receivables as well. In VW's case that is about $150B. So VW's true enterprise value is closer to $300B in my opinion.
  - fbergen 4y ago
    Wouldn't Price to Book (P/B) sort this out?
  - bryanlarsen 4y ago
    Yes, VW does have about $200B in current assets and about $85B in financial services receivables, but that still leaves them with a massive chunk of "real debt" larger than their market cap. Unfortunately the standard ratios only subtract cash from debt when doing this calculation so this calculation is one you have to do manually if you want to fairly compare car companies.
devoutsalsa 4y ago
Tesla commands a premium because the cars make fart noises.
fbergen 4y ago
I don't believe market cap to sales is a good ratio to look at when the margins are so different. A forward P/E of 25 for a company growing 50% YoY is not unheard of. Since you picked VW as reference, i had to look them up they have forward P/E 4.84 > trailing P/E 4.66 meaning they are shrinking (?)
- tephra 4y ago
  While a 25 PE is not unheard of at all, they have been up on much higher levels (190+ IIRC) before this price fall.
mutatio 4y ago
It's not really about units sold though is it? I guess yes, usually it's a good approximation, but you could sell a single unit for $5bn and have a superior net profit. Tesla's profit margin looks to be ~15%, whilst VW is at 3% - I'd love to know what it does to those numbers. Tesla's net income for Sept 2022 actually appears to be much higher than VW, if I am interpreting the numbers correctly.
- jacquesm 4y ago
  Usually profit margins shrink as volume goes up. You can't sell that many cars into the premium segment simply because the segment doesn't support the volume. VW sells a ton of cheap and small vehicles.
  - snovv_crash 4y ago
    > VW sells a ton of cheap and small vehicles Which inflates their unit numbers, exposes them to downturn risk, and doesn't really do much for their bottom line.
    - jacquesm 4y ago
      > Which inflates their unit numbers No, they are real sales. > exposes them to downturn risk On the contrary, those models are the most successful ones during an economic downturn. > and doesn't really do much for their bottom line On the contrary, those models are the mainstay of their business. Really, three out of three, why bother?
      - snovv_crash 4y ago
        Real sales, yes, but this is why comparing sales by units doesn't mean very much relative to stock price. Tesla has ~25% margins, VW has 3% margins. A recall, unsold stock or component shortages can quickly put VW in the red. This is what I mean by downturn risk, economic downturn is not the only potential problem manufacturing companies run into. > Really, three out of three, why bother? This level of communication isn't constructive.
stockerta 4y ago
It never made sense. Its a hype train that will collide with reality one day.
- hcks 4y ago
  Tesla made more money than VW selling 10 times less cars in September 2022.
  - oblio 4y ago
    Tesla sells luxury vehicles (by world standards) and there are only so many people who can afford them. Either Tesla stops growing at this rate, or they will have to "stoop" to cars costing $15k, in which case their profit margins will drop like a rock.
    - snovv_crash 4y ago
      So why doesn't VW just sell premium cars if it would make them more money?
      - jacquesm 4y ago
        Because there is a lot of money to be made selling lots of a cheaper product if you can produce it profitably. Besides that dealers are typically willing to sell such smaller vehicles at or near their own purchase price counting on the recurring income for service and fleet sales of such vehicles tend to be quite profitable because there is only one signature but a very large amount of money involved. Mercedes is a nice example of a premium brand, they make more money per car and a bit more money in total on lower volume. VW (or rather, the VAG group) is simply a different kind of company. But their profits are nothing to sneeze at.
        snovv_crash 4y ago
        > VW (or rather, the VAG group) is simply a different kind of company. Exactly. Which is why comparing unit sales and expecting that to correlate to stock price is not logical.
fragmede 4y ago
You forgot the supercharger network and the battery factories. Hardware isn't software and those moats are harder to erode, especially for something the size of, well, a car.
jacquesm 4y ago
Tesla's solar division is an albatross, not an asset.
- samwillis 4y ago
  Absolutely, he bailed out his brother.
s3000 4y ago
I have seen two arguments: 1. Tesla has heavily invested in robotics. They will be able to build cars much cheaper than their competitors. 2. Tesla has long-term lithium delivery contracts. They will be able to pay far less for their batteries while the prices for their competitors will massively increase I have not verified those claims but that would make Tesla's valuation more reasonable. There is also the self-driving car race. Whoever wins that will take almost all profits. With Twitter, Musk doesn't look too good in the software department right now. However, if you ignore Google, then Tesla still has a chance to win.
- oblio 4y ago
  > 1. Tesla has heavily invested in robotics. They will be able to build cars much cheaper than their competitors. Wasn't this proven wrong a bunch of times? Especially back with the Model 3 delivery issues and the "build in a tent" thing? There was an entire period where their delivery woes were blamed on them trying to automate stuff that wasn't worth it or couldn't really be made reliable. And by the way, if you think Toyota isn't investing in robotics and hasn't been for decades, I have a bridge in Bucharest to sell you ;-) > 2. Tesla has long-term lithium delivery contracts. They will be able to pay far less for their batteries while the prices for their competitors will massively increase This would be interesting to read about, do you happen to have a link? > There is also the self-driving car race. Whoever wins that will take almost all profits. With Twitter, Musk doesn't look too good in the software department right now. However, if you ignore Google, then Tesla still has a chance to win. Let's discount self-driving cars for the next decade when evaluating any company, I'd say. The tech just isn't there yet.
- anon223345 4y ago
  Every car manufacturer invests heavily in robotics, take a look at Magna Steyer, Toyota, and a number of the new Chinese EVs coming out
Gibbon1 4y ago
Musk is what we call a dummy. He could have bought GM for close to what he paid for twitter.
- randomsearch 4y ago
  Bit OT but generally speaking if you care about company culture and want to build something great, acquiring mature companies is not the way to go. You end up with an alien culture you can’t integrate into your own. This is why Apple only buy companies they absolutely have to, and specifically early stage where the culture has not ossified yet. So don’t buy GM - or Twitter…
  - xiphias2 4y ago
    It can be done with Twitter, the problem was that Elon got too emotional about it. Icahn was already looking forward to a proxy fight and just kicking out people without changing the product too much, but Elon buying his lots of shares was an easier way to make hundreds of millions in profit.
- bryanlarsen 4y ago
  Only if he was willing to assume GM's $80B of long term debt. So he would have had to really pay almost 3X as much for GM as he paid for Twitter
WeylandYutani 4y ago
Tesla no longer has a moat in China- a more important market for EV than America. As for Volkswagen the translation is "car of the people" which Tesla is assuredly not.
DieAgainAli 4y ago
Vw isn’t just cars. They’re are invested in things like Siemens’ energy to be the worlds biggest producer of synthetic fuel. Vw is the big boy and toyota is the big boy in asia. Tesla is valued the same as all the other car manufacturers put together. Their market share price is speculation from fan boys that want a poorly manufactured usb mouse to drive in that you have no way of fixing yourself or even taking to a specialist. If you want to make some money in the next year or so, open a short position on Tesla. Not financial advise, just 2 cents from a guy that worked in the motor industry for 15 years
- icelancer 4y ago
  > If you want to make some money in the next year or so, open a short position on Tesla. Not financial advise, just 2 cents from a guy that worked in the motor industry for 15 years Short pressure is enormous. It's not cheap to open this position.
- Fatnino 4y ago
  The market can stay irrational for much longer than you are solvent.
- seanmcdirmid 4y ago
  Tesla is priced as a volatile growing tech company, for better or worse. They aren’t priced according to current performance, but predicted future performance. VW is a known thing, they aren’t expected to get much bigger than they are today, they might even shrink a bit. Tesla is more of a risky bet, which is why it’s stock price is so volatile.

PaywallBuster 4y ago

Tesla fanboys claim Tesla is a vertically integrated company competing in different markets, hence having a huge TAM and higher chance for growth. Still!

snovv_crash 4y ago
There is something to this. If you include big chunks of Bosch, Siemens and all their other component providers in the VW market cap you would definitely get a more fair comparison to Tesla.

ErikHuisman 4y ago

You can't just look at mcap but forget to factor in debt. vwgroup $402.96B

samwillis 4y ago
Sure, and Tesla at $33.74B. But VWs debt is mostly due to them operating as a bank that sells loans to their customers to buy their cars. So it's more nuanced than just folding the into the calculation. Most other car manufactures don't do that directly. Point is that in broad strokes it doesn't add up.
- repsilat 4y ago
  So Tesla's enterprise value is $426.5 billion and VW's is $473.9 billion? Regarding the "operating as a bank", are we talking about net debt? I'd guess that if VW loaned money to customers those loans would be assets, right? They wouldn't get the cash from the customer, but they'd get something that looks about as good for their balance sheet hopefully?
  - pas 4y ago
    right, but they get the financing for those loans from other banks or from the bond market. they can't just make cars from thin air after all :)
  - bryanlarsen 4y ago
    The Enterprise Value calculations subtract cash from debt to determine the net debt level. Most think you should also subtract customer receivables as well. In VW's case that is about $150B. So VW's true enterprise value is closer to $300B in my opinion.
- fbergen 4y ago
  Wouldn't Price to Book (P/B) sort this out?
- bryanlarsen 4y ago
  Yes, VW does have about $200B in current assets and about $85B in financial services receivables, but that still leaves them with a massive chunk of "real debt" larger than their market cap. Unfortunately the standard ratios only subtract cash from debt when doing this calculation so this calculation is one you have to do manually if you want to fairly compare car companies.

devoutsalsa 4y ago

Tesla commands a premium because the cars make fart noises.

fbergen 4y ago

I don't believe market cap to sales is a good ratio to look at when the margins are so different. A forward P/E of 25 for a company growing 50% YoY is not unheard of. Since you picked VW as reference, i had to look them up they have forward P/E 4.84 > trailing P/E 4.66 meaning they are shrinking (?)

tephra 4y ago
While a 25 PE is not unheard of at all, they have been up on much higher levels (190+ IIRC) before this price fall.

mutatio 4y ago

It's not really about units sold though is it? I guess yes, usually it's a good approximation, but you could sell a single unit for $5bn and have a superior net profit. Tesla's profit margin looks to be ~15%, whilst VW is at 3% - I'd love to know what it does to those numbers. Tesla's net income for Sept 2022 actually appears to be much higher than VW, if I am interpreting the numbers correctly.

jacquesm 4y ago
Usually profit margins shrink as volume goes up. You can't sell that many cars into the premium segment simply because the segment doesn't support the volume. VW sells a ton of cheap and small vehicles.
- snovv_crash 4y ago
  > VW sells a ton of cheap and small vehicles Which inflates their unit numbers, exposes them to downturn risk, and doesn't really do much for their bottom line.
  - jacquesm 4y ago
    > Which inflates their unit numbers No, they are real sales. > exposes them to downturn risk On the contrary, those models are the most successful ones during an economic downturn. > and doesn't really do much for their bottom line On the contrary, those models are the mainstay of their business. Really, three out of three, why bother?
    - snovv_crash 4y ago
      Real sales, yes, but this is why comparing sales by units doesn't mean very much relative to stock price. Tesla has ~25% margins, VW has 3% margins. A recall, unsold stock or component shortages can quickly put VW in the red. This is what I mean by downturn risk, economic downturn is not the only potential problem manufacturing companies run into. > Really, three out of three, why bother? This level of communication isn't constructive.

stockerta 4y ago

It never made sense. Its a hype train that will collide with reality one day.

hcks 4y ago
Tesla made more money than VW selling 10 times less cars in September 2022.
- oblio 4y ago
  Tesla sells luxury vehicles (by world standards) and there are only so many people who can afford them. Either Tesla stops growing at this rate, or they will have to "stoop" to cars costing $15k, in which case their profit margins will drop like a rock.
  - snovv_crash 4y ago
    So why doesn't VW just sell premium cars if it would make them more money?
    - jacquesm 4y ago
      Because there is a lot of money to be made selling lots of a cheaper product if you can produce it profitably. Besides that dealers are typically willing to sell such smaller vehicles at or near their own purchase price counting on the recurring income for service and fleet sales of such vehicles tend to be quite profitable because there is only one signature but a very large amount of money involved. Mercedes is a nice example of a premium brand, they make more money per car and a bit more money in total on lower volume. VW (or rather, the VAG group) is simply a different kind of company. But their profits are nothing to sneeze at.
      - snovv_crash 4y ago
        > VW (or rather, the VAG group) is simply a different kind of company. Exactly. Which is why comparing unit sales and expecting that to correlate to stock price is not logical.

fragmede 4y ago

You forgot the supercharger network and the battery factories. Hardware isn't software and those moats are harder to erode, especially for something the size of, well, a car.

jacquesm 4y ago

Tesla's solar division is an albatross, not an asset.

samwillis 4y ago
Absolutely, he bailed out his brother.

s3000 4y ago

I have seen two arguments: 1. Tesla has heavily invested in robotics. They will be able to build cars much cheaper than their competitors. 2. Tesla has long-term lithium delivery contracts. They will be able to pay far less for their batteries while the prices for their competitors will massively increase I have not verified those claims but that would make Tesla's valuation more reasonable. There is also the self-driving car race. Whoever wins that will take almost all profits. With Twitter, Musk doesn't look too good in the software department right now. However, if you ignore Google, then Tesla still has a chance to win.

oblio 4y ago
> 1. Tesla has heavily invested in robotics. They will be able to build cars much cheaper than their competitors. Wasn't this proven wrong a bunch of times? Especially back with the Model 3 delivery issues and the "build in a tent" thing? There was an entire period where their delivery woes were blamed on them trying to automate stuff that wasn't worth it or couldn't really be made reliable. And by the way, if you think Toyota isn't investing in robotics and hasn't been for decades, I have a bridge in Bucharest to sell you ;-) > 2. Tesla has long-term lithium delivery contracts. They will be able to pay far less for their batteries while the prices for their competitors will massively increase This would be interesting to read about, do you happen to have a link? > There is also the self-driving car race. Whoever wins that will take almost all profits. With Twitter, Musk doesn't look too good in the software department right now. However, if you ignore Google, then Tesla still has a chance to win. Let's discount self-driving cars for the next decade when evaluating any company, I'd say. The tech just isn't there yet.
anon223345 4y ago
Every car manufacturer invests heavily in robotics, take a look at Magna Steyer, Toyota, and a number of the new Chinese EVs coming out

Gibbon1 4y ago

Musk is what we call a dummy. He could have bought GM for close to what he paid for twitter.

randomsearch 4y ago
Bit OT but generally speaking if you care about company culture and want to build something great, acquiring mature companies is not the way to go. You end up with an alien culture you can’t integrate into your own. This is why Apple only buy companies they absolutely have to, and specifically early stage where the culture has not ossified yet. So don’t buy GM - or Twitter…
- xiphias2 4y ago
  It can be done with Twitter, the problem was that Elon got too emotional about it. Icahn was already looking forward to a proxy fight and just kicking out people without changing the product too much, but Elon buying his lots of shares was an easier way to make hundreds of millions in profit.
bryanlarsen 4y ago
Only if he was willing to assume GM's $80B of long term debt. So he would have had to really pay almost 3X as much for GM as he paid for Twitter

WeylandYutani 4y ago

Tesla no longer has a moat in China- a more important market for EV than America. As for Volkswagen the translation is "car of the people" which Tesla is assuredly not.

DieAgainAli 4y ago

Vw isn’t just cars. They’re are invested in things like Siemens’ energy to be the worlds biggest producer of synthetic fuel. Vw is the big boy and toyota is the big boy in asia. Tesla is valued the same as all the other car manufacturers put together. Their market share price is speculation from fan boys that want a poorly manufactured usb mouse to drive in that you have no way of fixing yourself or even taking to a specialist. If you want to make some money in the next year or so, open a short position on Tesla. Not financial advise, just 2 cents from a guy that worked in the motor industry for 15 years

icelancer 4y ago
> If you want to make some money in the next year or so, open a short position on Tesla. Not financial advise, just 2 cents from a guy that worked in the motor industry for 15 years Short pressure is enormous. It's not cheap to open this position.
Fatnino 4y ago
The market can stay irrational for much longer than you are solvent.
seanmcdirmid 4y ago
Tesla is priced as a volatile growing tech company, for better or worse. They aren’t priced according to current performance, but predicted future performance. VW is a known thing, they aren’t expected to get much bigger than they are today, they might even shrink a bit. Tesla is more of a risky bet, which is why it’s stock price is so volatile.