Tesla stock price versus worldwide market share

From a friend:

I hate day trading but can’t help but feel like I missed out on Tesla stock. Some people say it is going up another 20x, which would make them worth many trillions of dollars.

How can the big automakers continue to ignore Tesla, which is now a Colossus astride the stock market at least?

What if they’re managing the real world of car sales? Roughly 80 million cars are sold each year annually (CNBC). Tesla accounted for 367,500 of those (source). That’s 0.4 percent market share.

So perhaps there is no point in worrying about a 0.4 percent loss of sales unless Tesla can convert its stratospheric market cap into R&D money that will enable the company to pull ahead of Toyota, Honda, Audi, and BMW in overall engineering.

Separately, my Irish friend, a huge car enthusiast (owns an Aston Martin, a Land Rover, a vintage Mercedes, etc.), got his first ride in a Tesla S down in Charleston, South Carolina. “That was rubbish,” he said, after we got out of the 20-minute Uber trip from Signature to downtown. Interior noise, ride smoothness, seat comfort, and upholstery (“was that cheap vinyl?”) were not up to his standards for a luxury vehicle.

(By contrast, he loved an Uber ride in the front seat of a new Jeep Wrangler Unlimited, back from the USS Yorktown (CV-10; below), admittedly fairly noisy with the soft top.)

Finally, my friend with the Tesla X recently traded it in on a Tesla S. The “autopilot” software is getting worse, not better, in his opinion. The system gets confused about oncoming traffic on two-lane roads, freaks out, and hits the brakes unnecessarily. (Our 2018 Honda Odyssey, roughly once per month, similarly warns spuriously about an oncoming car, but the system does not apply brakes by itself.) He says that the car won’t use regenerative braking when the battery is cold (i.e., most of the time here in Massachusetts). Tesla has concluded that the batteries don’t like the sudden injection of power unless they’ve previously been warmed up, as they are during the first couple of minutes of being connected to a Supercharger.

Readers: What accounts for Tesla’s huge market cap? Is it achievement in the domain of self-driving technology, potentially revolutionary for sales? This market research firm does not put Tesla even in the top 10.

Bonus: demonstrating my own commitment to the battery-electric vehicle revolution by sitting in a 2005 Cirrus SR20 while wearing a Nissan LEAF cap:

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13 thoughts on “Tesla stock price versus worldwide market share

  1. Apparently the AC motors and battery packs are extremely good, and the whole skateboard is pretty good.
    If they spun off the coachworks and focused on manufacturing the skateboards for other auto makers to build cars on, it would probably be a viable business.

  2. Lithium batteries can’t be charged below about 5°C otherwise they suffer irreparable damage. But they can be discharged until quite lower temps. This means you need to waste battery power (or charger) to first heat them up before you start actually charging. That is, if the car has active battery heating available.

    What nobody talks about much with any electric car in warm/hot regions is how, without active cooling (and many rely on passive airflow cooling), the battery lifetime drops dramatically above 30°C. At regular middle eastern desert temperatures you can throw away the battery in a few years of regular use. It’s a good thing those oil boys have spare cash and spare cars to choose from.

    In other words, BEV are OK for temperate climates without temperature extremes, but borderline useless everywhere else.

    And Tesla cars are junk anyway, build quality of the cheapest/worst traditional car brands sold at premium prices.

    • Lots of electric cars, including many Teslas, seem to be doing great in Norway, which is not known for a temperate climate. My 8-year old Nissan Leaf seems to do regenerative charging just fine well below 5°C. Guess after a few minutes of driving the battery is heated enough. After more than 100,000 miles, and minimal trips to the mechanic, the battery capacity is still around 85%. I should also note that here the temperatures are below 0°C for almost half of the year.

  3. Tesla is grossly over valued. Investors know nothing about the technology. Tesla is losing money on every sale, but making it up in volume. The other automakers are waiting for EV’s to become economically viable. It’s not that they can’t build EV’s, it just doesn’t make sense right now. I believe the Chevy Volt outsold Tesla handily. It made economic sense with the federal tax credit. Now the credit is gone, it doesn’t make sense, they pulled the plug. When EV’s make sense again, it will be game on, and they will unleash their tremendous experience and capability to compete. The latest Corvette is a great example of this, and puts every supercar on notice at a fraction of the price. As VV has alluded to, there is a huge reckoning lurking with respect to batteries. Also, Tesla owners, and investors, are entirely ignorant about the longevity and cost of the batteries. They all think they’re driving around for free, not realizing the battery is an extremely expensive consumable with a finite life. When the warranty periods begin to lapse, which is soon, and batteries begin to fail and have to be replaced at the owners expense, there will be a huge correction in the market and demand. There’s an opportunity for finance here as well. Who can afford to shell out $15-30k cash for an unexpected battery replacement? This is all predicable and certain, yet almost no one is aware or talking about this. Aircraft owners and operators understand they have to account for expensive and certain maintenance when they figure the operating cost. This concept is new to most car owners at the magnitude of an EV battery. I predict a wave of sensational media “revelation” and mild outrage when this starts to happen and word gets out. Stock value will take a hit.

  4. > What accounts for Tesla’s huge market cap?

    Two words: Hollywood Elites. Tesla has enormous celebrity cachet, and while you might call that an intangible, it has to account for some of their stock valuation. Elon Musk plays it very well. No other automaker possesses a cult following among celebrities to rival Tesla’s. How many of them want to boast about or be seen in their Fords, Chevys, Toyotas, Mercedes, etc.? But you can’t throw a rock at the Chateau Marmont without hitting someone’s Tesla:

    https://www.hollywoodreporter.com/features/why-chateau-marmont-valets-are-unsung-heroes-hollywood-1274735

    “The luxury rides ensconced at the Chateau’s garage have changed too, mostly for the better. Anguiano didn’t know how to drive stick when he was transferred out of housekeeping. “I told my boss and he said, ‘That’s your problem, not mine,’ ” he recalls. Humongous Hummers — the great dread for the valets — and extra-wide Cadillacs have been replaced by Teslas: “They’re magnificent, so easy to deal with,” Romero enthuses. “The only thing is, we only have two chargers and sometimes we have many more here at once.”

    Presumably the people in Hollywood who drive their Teslas to the Chateau Marmont will be able to afford the battery replacement cost. It will be interesting in a few years to see if other manufacturers’ EVs start to chip away at the Tesla valet juggernaut.

    The powers that be have noticed. Hummer is coming back with an EV on May 20. Tesla is not going to be the only game in town for people who want a 1,000 horsepower electric truck.

    https://www.yahoo.com/entertainment/way-gmcs-hummer-ev-offer-154000485.html

  5. Oddly, I drove by a bank of about 20 vacant Tesla charging stations today in the parking lot of a Kohl’s department store in a lower middle-class FL community.

  6. Well, battery park in my Tesla worms up in couple minutes of driving. As for supercharging, if you select supercharger in navigation, it pre-conditions battery pack for immediate full-speed supercharging on arrival.

  7. A rare photo of a pilot not doing the thousands of things required to fly legally. Everyone expects Tesla to be amazon.com of all wheeled vehicles in 20 years. They have a modular core system that works & are just going to keep extending it to semis, ATVs, pickup trucks, roadsters. They’re going to make a lot of the power generation system too.

    • lion2: There is almost nothing that needs to be done in a Cirrus that is in cruise flight in VMC conditions! Switch the fuel tank every 30-60 minutes (in response to a reminder from the Garmin 430 if one forgets). Respond to ATC every 10 minutes if getting VFR advisories.

      I guess your theory is plausible to some extent. Amazon doesn’t own any revolutionary technology, only evolutionary tech and superior management. But, on the other hand, Amazon is a huge outlier. Very few enterprises in the history of humanity have done as well. U.S. car companies have an especially poor track record of being vulnerable to foreign competition. Without bailouts from taxpayers, including indirect bailouts via tariffs that made imports expensive (and we still have a 25 percent tariff on the only vehicles that U.S. companies make at a profit: https://en.wikipedia.org/wiki/Chicken_tax ), all of the U.S. companies would have been wiped out by the Japanese, right?

      So to have faith in Tesla for the long run we have to believe that they have set up walls around their business that are stronger than what GM, Ford, and Chrysler had. (Tariffs might not save Tesla because the competition already has factories here in the U.S.)

    • Phil, as you know, the bulk of Tesla’s value, if it exists at all, is far in the future. Right now, both shorts and longs are just telling themselves stories. The belief that EVs don’t make sense and simultaneously that Tesla will be wiped out by legacy automakers is a story(this plan didn’t work great in computers for IBM, and regarding foreign competition, American companies did well until suits took them over). The belief that electric cars are/will soon be better than gasoline cars is a story. If the first story is correct, Tesla will be acquired by one of Musk’s buddies in Silicon Valley for a face-saving price. If the second story is correct, it will be one of the most valuable companies in history. Hence, the stock price.

      Also, you frequently cite people who complain about their Teslas. Everyone I know that owns one gushes about it to an absurd degree, as if you handed an iPhone 11 to someone used to an old car phone. You may be citing people who are persnickety about cars, like the car equivalent of the person who somehow thinks records are better than MP3s. Such a person may not have believed that the iPod would be a success.

  8. Tesla is driving hard to be the best battery manufacturer. They bought Hilary Systems to close out and own that automated battery technology. This is part of the reason for the recent stock ruñup. I know they are doing more to improve battery performance. These steps give them a very big mot. They are doing similar things with power wall and skateboard tech. Thus the big evaluation.

  9. Phil, you’re looking at this all wrong.

    The product offering really has no bearing on the value of a company – if it did, I would not be typing this on a laptop running Microsoft’s latest OS!

    In theory, investors buy equity because they believe the future cash flows produced by the business – discounted at the appropriate rate – will justify the price paid for the stock today.

    No matter what you think of his cars, battery packs, or shingles, Musk has demonstrated an amazing ability to get people to buy his stuff, to the tune of $24 billion in revenue last year, generating roughly a billion in free cash flow.

    If you think he can scale revenue 10x from where it is today, while doubling his operating margins, then with long term interest rates hovering around 2% (and with investors expecting rates to stay that low indefinitely) Tesla is priced fairly accurately.

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