Is Telsla Market Cap too high

With a market capitalization about $1 trillion dollars (in Nov 2021 but $0.8T in Feb 2022), is Tesla market cap too high? The combined market cap of the next 10 auto manufacturers including Toyota, Volkwagen, General Motors Ford and Stellantis is only as much as that of Tesla. Data for each company is in the table below. For more details about global car production, check out global car sales and EV Pickup Trucks are coming. Data is taken from annual reports and Yahoo.com, and other data sources.

Is tesla market cap too high compared to 10 companies including toyota VW BYD GM and Ford
Market Capitalisation of Tesla versus the rest (Numbers from October 2021)

Is Telsla Market Cap Too High?

Here are just some of the reasons why some consider it too high and others suggest it will exceed $2T within 2 years.

Increasing Vehicle Sales

Tesla produced about 1m vehicles in 2021. Most forecast to grow 50% Year on Year for the next 5 years without major capital investment. Factories include doubling of the Shanghai, China factory to 2m pa., ramp up of new Gigafactory Texas of 2m, Gigafatory Berlin (1m) and existing Fremont (1m) which would take it 6 million cars by 2025. At the Q4/2021 call, the company said they were currently constrained by chip shortage and could meet 1.4m in 2022. Without production at Austin or Berlin.

Highest profitability of all manufacturers

Gross Margin from vehicle production is highest in the industry. Telsa has less than $20b in capital over past 3 years, and others have over $100b. See image below on margins from James Stephenson @ICannot_Enough

Increasing Efficiency

Tesla has no legacy dealers, factories or vehicles and is using the most advanced technology to eliminate labour. Adoption of “gigapress” that produces both front and rear casting supposedly reduced the number of robots by 50%.

Valuable Insurance Business

With its own insurance business that is based on individual driving performance, Tesla has a new business that can reduce risks and increase gross margin for no marketing costs.

Energy Business

The battery business, for households and Big Grid, has been constrained by battery availability. It is forecast to expand from 1GW to 1TW within 5 years

Robotaxi Value

Full Self Driving (FSD) is in Beta phase. Some analysts suggest some of the $12,000 revenue margin to further increase returns and only 15% of existing customers currently buy it due to availability.

Leading technology of Electric Vehicles

Leading technology of electric drive including manufacturing technologies such as manufacture, software management provides a low cost model others are trying to do but with their extended supply and OEM chain will require billions of investment.

Battery Technology

With 15 years of technology, their latest 4680 battery technology may decrease battery costs 50%. Tesla has supply chain control unlike some other manufacturers..

Tesla Growth is exponential

From Twitter James Stephenson at https://twitter.com/ICannot_Enough

Forecast Vehicle Sales increasing to 3m per year

Forecast sales by James Stevenson showing ramping up of production.
Image from Pierre Ferragu in New Street Research from Twitter

Cash Returns from Operating Assets Highest in Industry

Cash returns on operating assets.

GAAP Operating Margins

Source: Twitter James Stephenson @ICannot_Enough

Compare Tesla – Ford – GM Q1, 2022

Despite Ford or GM delivering 3 times the number of vehicles, their margin per car is about 20% that of Tesla.

Q1 22 $millionsTeslaFordGM
Reported GAAP Net Income3,318(3,110)1,987
Plus mark-to-market Rivian Loss5,4000
GAAP Net Income (Ex Rivian)3,3192,2901,987
Deliveries (number)310,048966,000831,000
Net Income per Delivery$10,048$2,371$2,391
Data from Company reports and Twitter https://twitter.com/forwardcap/status/1519414030447910914

Global Car Manufacturers

A comprehensive list is shown below. Tesla is 17th of the number of the manufacturers but 8th most profit. It is 50% more profitable than GM, even though it currently sells just 1/6th of the vehicles.

GroupSalesRev
$B
EBITDA
$B
3Cap
(B)
Debt
$B
Invest
(3yr)
PEOp
Margin %
Toyota9,529,000249.46.125818299.39.48.08
Volkswagen9,306,000254.151.01302274977.06.38
Stellantis6,915,00098.816.46176357.8-1.92
GM6,828,000122.527.088110778.17.43
Hyundai-Kia6,406,00088.112.328912094.45.68
SAIC Motor5,601,0001060.05371639122.5
Honda4,399,000121.81.8491121986.05.01
Ford4,187,00012716.08714521.712.47.17
Daimler AG2,841,000175.916.78316920.06.311.19
Suzuki2,448,0004.0196.63511.8
BMW Group2,325,000112.822.0671134.610.0
Geely1,321,000146.927633.7
Mazda1,244,000312.161511.3
Great Wall1,116,000628.95627.4
Subaru885,0003414011.6
Tata835,0001020.22510-34.0
Tesla980,000549.6
5 (Q1/22)
1,2000.11188.019.2
Ferrari9,2004.860.01448.024.4
Aston Martin3,4000.62-4.6
McLaren2,9000.781
BYD426,000241234935.0
Rivian920(2021)
10,000(2022)
00.0900.184.6
Lucid300(2021)
12,000(2022)
0680.216N/A
The following table has been constructed from a variety of sources (Organisation Internationale des Constructeurs d’Automobiles), Statista, and Companies Market Cap. The data is EOEI - as the sources of data varies.
There are a large number of other car manufacturers. E.g. There are over 240 EV companies in China alone making EV cars. Some of the new entrants (Rivian, Lucid) have high market cap but don’t yet have any major sales. Others have production and low market cap.
Some of debt is vehicle lease and inventory.
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