Let’s be honest, comparing Tesla to conventional automakers like GM, Ford, and Fiat-Chrysler Automotive is a little unfair — the “Big 3” don’t sell solar roofs or energy storage systems, just cars.
Even so, it has much of the investment world and auto world in a bit of shock that Tesla [TSLA] is somehow now more valuable than each of the Big 3, passing GM [GM] earlier today. Tesla is now just ~$1 billion away (in market valuation) from passing Honda and breaking into the global “Automaker Top 5.”
If you feel a bit like you’re having déjà vu, yes, it was just about a week ago that TSLA passed Ford [F] on the stock market. At the moment, market valuation for Tesla, GM, and Ford break down as follows:
- Tesla [TSLA] = $51.54 billion
- GM [GM] = $50.22 billion
- Ford [F] = $44.64 billion
I wrote about some reasons I think Tesla passed Ford in market cap last week, but that wasn’t at all a comprehensive breakdown or discussion. With the surprisingly quick rise above GM, let’s have a look at the various arguments for why Tesla should be worth more than large automakers like GM and Ford (note that I’m not claiming these arguments are all 100% correct, but I certainly buy into the majority of them). If I’m missing any (I’m sure I am), be sure to drop us a comment below the article.
Tesla is far and away the electric car front runner. It will take a decade or more for anyone to catch up to Tesla when it comes to producing high volumes of competitive, fully electric cars. (And by the way, electric cars are about to take over the market.)
Tesla has AI on its side, and the company is going to explode when it unveils its robotaxi service. Elon has hinted at this Uber-like Tesla system using self-driving Model 3, Model Y, Model S, and Model X customer cars. We are not sure when exactly self-driving cars will be free to go taxi people around, but Elon expects it will be much sooner than you think, and that Tesla will have a system in place that will let customers send their cars out as robotaxis when they aren’t in use in order to make some extra cash. Elon thinks some Tesla owners could even make more money on such a system than they spend on the car itself. Of course, other automakers have such ideas in the oven as well, but TSLA investors seem to have much more faith that Tesla’s system will be quicker to market, better, and bigger.
Tesla Solar. Cars are one thing, but Tesla recently acquired the largest rooftop solar installer in the US, which is also now producing rooftop solar systems and will produce innovative, supposedly cost-competitive solar roof tiles. GM & Ford don’t have this.
Tesla Powerpacks & Powerwalls. Tesla’s energy storage systems are hugely cost competitive, breaking open a massive grid-scale battery storage market in locations around the world while also weaving itself into into initial home energy storage markets. GM & Ford don’t have this.
Tesla has rocket science on its side. As TeslaMondo recently hypothesized, investors who see SpaceX achieve remarkable accomplishments — like landing a rocket that went into space and returned to Earth — gain confidence that Tesla can tap into that expertise and Elon’s brilliance in ways that will put/keep Tesla at the forefront of automotive technology. Seems logical, doesn’t it?
Tesla has a story to tell. It’s a compelling, insanely addictive, and highly effective story. In short, Tesla’s goal is to help save the world — risking everything and putting as much sweat and blood into achieving the goal as possible. Via electric cars, batteries, solar panels, solar shingles, robotaxis, etc., Tesla is working to help humanity … and that leadership will lead to tremendous profits. Plus, it’s just something to support.
It’s all about the batteries. One underlying competitive advantage Tesla seems to have is a core technological one. Tesla seems to be a step or 5 ahead on batteries. That’s why it is so quickly bringing a compelling $35,000 electric car to market, why it is selling massive energy storage systems around the world, why it is able to sell so many more EVs than others, and why it could be painfully hard for other automakers to catch up anytime soon. Chemistry improvements as well as economies of scale from Gigafactory 1 and other gigafactories being planned around the world put Tesla in a position that it seems all other automakers are years away from.
It’s all about the Superchargers. For investors who perhaps discount other factors but do see electric cars as a disruptive technology that’s arriving now, there’s still a massive competitive advantage Tesla has over other automakers. It has comprehensive, integrated Supercharging networks across North America and Europe as well as in large parts of China, Australia, the UAE, and other major new markets it is entering. How can automakers compete with Tesla if they don’t have superfast-charging networks that genuinely allow for convenient, long-distance trips?
Tesla Semi Trucks, Insurance, Much Better (More Efficient) Factories, etc., etc. In other words, as Tesla grows, it will keep finding corners of the economy that could be improved and it will bring more and more competitive products to market. This innovative, efficiency-focused, physics- and engineering-based approach is part of “the story.” Of course, it’s worth noting the obvious here — much of this story centers around one man…
Naturally, there are also well-worn reasons many people claim TSLA is vastly overvalued and should come back down to Earth. Those include: big automakers can catch up to Tesla at any time if/when EVs become mainstream (I think that’s nonsense), Tesla can’t scale its production enough to become a large automaker in the coming decade (I think that’s nonsense), Tesla can’t make reliable and affordable cars for the masses (I think that’s nonsense), Tesla’s energy storage and solar products won’t amount to much (I think that’s nonsense), Tesla’s a she-devil in disguise (okay, maybe that one’s legit).
For more on why electric cars, solar power, and batteries are disruptive technology, I recommend watching some of my longer presentations:
My 1st EV Summit presentation (2nd one will be published soon-ish):
If you can’t be bothered to watch a long presentation, here’s a super short version: