“Tesla is a ‘story’ stock. It trades higher or lower based on the story that CEO Elon Musk and other Tesla enthusiasts spread about the company’s potential to completely take over the global auto, energy, technology and transportation industries in the long-term.” So said Wall Street pundit Wayne Duggan last July, when Tesla shares were trading at US$687.20.
As I write, Tesla shares are trading at more than a thousand bucks each, which means Tesla is valued at a trillion American dollars, give or take. Tesla is worth more than three times as much as Toyota, more than seven times as much as Volkswagen, and about 10 times as much as Ford.
Elon’s clearly been telling some good stories lately. Because those numbers simply don’t add up.
Tesla produced just over 936,000 vehicles last year and in 2020 reported its first ever full-year profit in 18 years of operation – US$721 million on revenues of US$31.5 billion. By contrast, those slackers at Toyota only built about 10 times as many vehicles, and in the financial year ended March 31, 2021, the company reported a profit of about US$20 billion on revenues of US$236 billion.
But, but… argue the fanboys, Tesla’s all about the future. Toyota, Volkswagen, Ford, and the rest of the legacy carmakers… they’re history.
Acolytes insist Tesla is the undisputed leader in EV design and technology and will increase its sales and production volumes by 50 percent a year for the foreseeable future. They believe Tesla can make big bucks from things like its power storage business and from allowing other EVs to access its Supercharger network. And then there are the huge profits to come from the robotaxi business once Tesla’s Full Self Driving technology is developed.
Only some of those things are true. And none of those things is a given.
Wall Street corporate finance expert David Trainer reckons Tesla would have to be selling almost 31 million cars a year by 2030 to justify its trillion-dollar valuation. But even if its two new factories in Texas and Berlin are fully on-stream by the end of this year, Tesla’s total production capacity will be less than one-tenth that number.
And with analysts calculating the automotive industry will splurge US$515 billion on a swarm of new EVs that will hit the market by the end of the decade, there’s also little evidence Tesla – which has spent less in total on R&D since 2008 than Volkswagen, Toyota, and Mercedes-Benz each spent in 2020 alone – can be anything more than a bit-player in a global EV market estimated to reach 47 million units a year by 2030.
Tesla’s total share of the global EV market last year was less than 20 percent, with just two models, the Model 3 sedan and Model Y SUV, accounting for 97 percent of its sales. The much-hyped Tesla Cybertruck pick-up Elon Musk claimed would be in production in 2020 now looks to have been delayed until 2023 at the earliest. References to the Tesla Roadster, unveiled as a high-performance flagship in 2017, have quietly disappeared from the Tesla website. The car that kickstarted it all, the Tesla Model S, is now nine years old, with no replacement in sight.
By the end of 2022, Ford expects to have sold 80,000 electric-powered F-150 Lightning pick-ups and is already planning to boost production to 150,000 a year. Mercedes-Benz will have twice the number of EV models on sale as Tesla. And that’s just the tip of the iceberg: within eight years, Toyota and GM alone will between them offer consumers a choice of 60 different EVs.
Nope, trillion-dollar Tesla just doesn’t add up.
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Keyword: OPINION: Inside the Tesla bubble