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Published on February 22nd, 2015 | by James Ayre

22

Elon Musk: Tesla Could Be Worth As Much As Apple Is By 2025

February 22nd, 2015 by  


Elon Musk’s very healthy confidence in the future success of Tesla Motors was on display during a recent Tesla conference call, where he made the noteworthy comment that he expected Tesla to be worth as much as Apple by the year 2025 (just one decade from now) — based on his expectation of 50% annual growth.

Ahem. Nothing wrong with a healthy sense of confidence — and to be fair he has mostly been right to date — but I do wonder about this comment. I’m not saying that it won’t happen, but it’s a somewhat strange comment/prediction to make — definitely in keeping with Musk’s past comments, though.

tesla-model-s-lineup

As a comparison of where the two companies stand right now, Apple’s market valuation recently passed $700 billion (just within the past couple of weeks), while Tesla’s is currently around $27 billion. (For further background between the two companies, see: Tesla & Apple Escalating Poaching War — Apple Now Offering $250,000 Signing Bonuses + 60% Pay Increases)

Here’s a transcript of the full comments from Elon:

We’re going to spend staggering amounts of money on CapEx. I mean, for good reasons, and with a great ROI. And it’s important to not look at CapEx in isolation, because that CapEx obviously is being done for reason, in order to capture substantial future revenue flow. I’m just saying the sort of back-of-the-envelope — if you make certain assumptions, and I emphasize these are just certain assumptions… I’m not saying they’re true or they will occur. I bet that they do occur, personally — that’s just my personal opinion. I mean, if you take this year’s revenue around $6 billion or thereabouts, and if we are able to maintain a 30% growth rate for 10 years added to your 10% profitability number and have a 20PE, our market cap would be basically the same as Apple’s is today. Now that’s going to require a bit — on the order of $700 billion. Obviously, getting there will require some significant CapEx.

But I’m hopeful that we can do this without any significant dilution to the company — maybe minor dilution, but nothing serious.

The bottom line for me, for all the “good” and “bad” that goes with it, is that the guy is clearly the driven sort — so I’m expecting such bullish optimism likely to continue even if further issues/underperformance pop up.

We should get a very good idea of the future prospects of Tesla relatively soon, though — with the upcoming release of the Model 3, and the beginning of production at the Gigafactory, we should get a good sense of what the future holds for the pioneering company.

h/t Gas2

Image Credit: Tesla Motors






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About the Author

's background is predominantly in geopolitics and history, but he has an obsessive interest in pretty much everything. After an early life spent in the Imperial Free City of Dortmund, James followed the river Ruhr to Cofbuokheim, where he attended the University of Astnide. And where he also briefly considered entering the coal mining business. He currently writes for a living, on a broad variety of subjects, ranging from science, to politics, to military history, to renewable energy. You can follow his work on Google+.



  • Michael G

    Mr. Ayre, you say in your article 50% growth projected but in the Musk quote it is 30% growth. Which is correct?

    If 50% annual growth – EVs competely replace ICEs in annual sales in the US in 12 years. If 30% growth, that sales replacement takes 18 years. In either case, figure an additional 20 years to replace all existing ICEs. 50% growth sounds absurd to me, 30% growth is ambitious but seems doable. His current projections for growth to 500K vehicles from the Gigafactory work out to about 37%.

    The 20PE he estimates is very high for a car company. More typical is 3-9 except for unusual circcumstances. VW about 3, BMW about 5-6, Audi around 7, etc.

    http://seekingalpha.com/article/670131-are-low-p-e-ratios-the-new-normal-for-car-companies

    • Mint

      That seekingalpha article is old. Right now GM has a P/E ratio of 23, F at 16, VW is 13, etc. PE ratios are low when growth potential is poor.

      Having said that, Musk’s calculations are wrong. Assuming $6B sales next year, $6B x 1.3^10 x 10% x 20 = $165B market cap. Still need more than 4x more growth to match AAPL.

      • Michael G

        Things are going well now so as you say growth is expected but…

        Ford PE is now 14 projected to go to 7 by 2017
        http://www.nasdaq.com/symbol/f/pe-ratio

        Similarly GM
        http://www.nasdaq.com/symbol/gm/pe-ratio

        Audi 6.55 now
        http://www.marketwatch.com/investing/stock/nsu?countrycode=de

        Anyway, whether P/E is 7 or 12, 20 is very high for a car co.

        • Mint

          Your own link in your previous post shows how bunk low projections for P/E are.

          P/E is only going to be low for companies expected to stagnate or shrink. Average P/E ratio for the stock market is around 20 right now and it’s only going to keep growing with the rapidly growing pile of cash at banks earning ~0%. TSLA should at least get an average multiplier.

  • Shiggity

    Many people think Apple is going to buy Tesla Motors. It’s more like SpaceX / Tesla Motors is going to buy Apple.

  • Jason hm

    Apple has created is creating some great products..It’s just that their not manufacturers their a designers..They are the masters centralizing high profit elements while outsourcing capital heavy manufacturing..Remember Apple couldn’t even make the logistics of a TV pencil out..Their addicted to high profit margins and their is nothing else out their with the margins of personnel electronics, well maybe jewelry and high end clothing..Even in electronic Apple has to maintain their luster their trendiness our their margins will decrease as they will then compete on price and performance alone.If Apple enters another product market that mystique does does not automatically transfer they have to build it up.

    • As automation becomes more advanced, it becomes possible to be a design-based company while at the same time manufacturing affordable products with good quality.

  • MrL0g1c

    BMW market Cap 70 billion
    Apple market cap 750 billion / absurd
    So, no Tesla won’t be worth as much as Apple.

    • Joe Viocoe

      Tesla’s Market Cap 5 years ago? Nothing.
      Today 27 billion

      Remember, there was also a time where a “personal computer company” could “never” reach the market cap of a major automaker.
      People underestimated the potential of a new market then…as they do now.

  • JamesWimberley

    Apple’s sales are $100bn a year. GM’s are $156 bn. If Tesla is very successful, it could reach Apple’s sales. But profits and capitalisation? Dream on. Apple has carved out a unique monopoly niche, with superbly designed products, a unique operating system, fans, and glamour. Apple fans will rush out to buy the latest iPhone. If Tesla’s cars are any good, they will be kept for years. Tesla does have an edge at the moment, but its proposition – a high-quality, long-range, medium high-priced all-electric car – cannot be patented and is being replicated already by BMW. A more realistic ambition would be to displace Fiat-Chrysler from the No.3 slot in the USA.

    BTW, Apple’s superprofits are not assured long-term. My wife has an iPhone. I use a Motorola Moto G. It is almost as good, for a third the price, and I am not tempted to upgrade. The growth in the smartphone market is at the low not the premium end, and the low end is improving faster. Tesla may well overtake a deflated Apple.

    • Jon Brookshire

      Couldn’t agree with you more, sir!

    • Raahul Kumar

      I think that Tesla is pretty confident of strong growth on their part and lackluster growth on the part of Apple. I don’t see Apple, or any of the current IT companies, which are vastly overvalued, sustaining these crazy prices.

      Have you heard of the word “Bubble”? Tesla, on the other hand, does have solid growth prospects.

  • miki

    Elon also said he is committed to Tesla only until 2017 or so … so all these nonsense predictions are meaningless

    • Ross

      He has said he’ll be with Tesla if not as CEO for the rest of his life. It is hard to see him taking is eye off it until we’re fully electric and the colony on Mars is up and running.

      • Bob_Wallace

        Think Elon will open the first Tesla showroom on Mars personally?

        • Ross

          With no O2 to speak of in the Martian atmosphere the case for electric is even better there.

      • Philip W

        Yeah this. He basically said he will be CEO of Tesla at least until he reached his goals. And he said that his goal is to electrify the complete automotive industry. So he probably will be CEO for a long time and a part of Tesla until he dies.

  • Will E

    One Gigafactory under construction, many many to follow.
    EV cars is Tesla, there are 1,2 billion gascars to replace.
    Energy Storage busines is just starting up. Tesla is also Energy storage. there is some zillion dollars in fossil energy to replace.
    Elon Musk is very diplomatic.
    I say
    can a gascar exist next to EV
    I dont think so.
    can fossil exist next to Solar and Wind and Storage
    I dont think so.

    Elon Musk is working on a multiple zillion business plan.
    now today.
    and I like it.

    • Shane 2

      Too much fanboism. “EV cars is Tesla” ? Doesn’t Nissan make more EVs than Tesla?

      • Will E

        Read my lips,
        Tesla is creating a new world order.

        • Shane 2

          Read my lips, and new world order. Hmm, two of GHW Bush’s most well known phases. That is unlikely to be a coincidence.

      • Vijay Kamat

        Both are in EV, but different segments, then again Kandi also makes too many EV’s.

        Too kick the high of gas, not just one many ideas needs to be implemented on varied and vast scale. I would like Bio-Methane where it is feasible, bio-diesel where it is feasible, energy efficiency ANYWHERE my friend.

        Simple act of fasting can have global ramifications, just like meatless mondays. All the problems are in my view are closely related. Every needs to lift a block and put it in the right place to solve this gigantic puzzle.

        By the way apple car is a very costly proposition. I will wait for car sharing from Kandi like service here in India.

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