Why is Tesla Worth So Much?
Tesla is an extraordinary company. As of late October 2021, the company cracked a market value of US$1 trillion, the first car manufacturer ever to do so.
But, why is Tesla worth so much?
We find out.
Firstly, the recent news explained
Tesla CEO, Elon Musk, almost instantly became around A$48 billion richer and Tesla, the company itself, cracked the US$1 trillion mark.
This is what 1 trillion looks like: 1,000,000,000,000
It would take about 11 days of non-stop counting to reach 1 million. Not long, compared to the 30 YEARS it would take to count to 1 billion.
It would take 31,688 YEARS to count to 1 trillion.
- Toyota’s net value is about US$240 billion.
- Daimler AG, parent company of Mercedes-Benz, is around US$103 billion
- Volkswagen is valued at roughly US$122 billion.
iPhone maker, Apple, on the other hand, is worth US$2.5 trillion.
The reason Tesla’s valuation went up so much recently was due to car hire company, Hertz, announcing their intention to buy 100,000 Tesla vehicles to add to their fleet.
Experts say that the large order will help Tesla position itself as a mass-maker of vehicles rather than a luxury brand.
This is beneficial as more every-day buyers will likely be drawn to their products.
But there are more Toyotas on the roads than Teslas!
It’s true too. Worldwide, Toyota sold over 9.3 million new vehicles in 2020 and Tesla sold only 500,000 - in other words, Toyota sold 1760% more vehicles than Tesla last year.
Tesla is, as many point out, as much a tech company as it is a car company. This makes the company’s stock hugely sought after, rising over a mind boggling 20,000% since it went public in 2010.
If you bought $100 AUD worth of Tesla (TSLA) shares in June 2010, when the price was $5.11, you would have received 19.57 shares.
Today, your $100 would be worth over $26,500 - not bad for doing nothing.
The above example shows how much the company’s shares have exploded.
Booming demand for electric vehicles and the technology to back them up are behind Tesla’s rise.
Tesla’s infrastructure, like its Powerwalls and array of charging options and stations, add to the longevity of the company.
Further adding to longevity are Tesla’s factories - the Gigafactories. A “Gigafactory” refers to one of several of Tesla's goliath factories around the world. Locations include California, Nevada, Shanghai and Berlin, among others. A global manufacturing network is another important ingredient in valuing Tesla.
As are its long list of non-car products, such as:
- Tesla Powerwall - a lithium-ion battery home energy storage device that acts as solar energy storage and backup power.
- Tesla Powerpack - similar to the Powerwall, but intended for businesses.
- Tesla Megapack - large-scale rechargeable lithium-ion battery for grid energy storage for use by utility companies.
- Tesla Solar Roof - a fully integrated solar system for homes and businesses.
The company also has hot new products confirmed on the horizon like the Cybertruck and electric trucks which give it an exciting future, something investors look for.
Topping all that off are the company’s consistent hit products such as the recent bullet-like Model S Plaid.
The Plaid is currently the world’s fastest production car in terms of acceleration with 0-60mph times around 2 seconds. That means a four door sedan costing around A$232,000 will beat hypercars priced in the millions.
Tesla’s valuation is based on demand for tech, EVs, infrastructure and its massive stock price boom, not only on how many cars it sells.
The brand’s quirkiness also helps
Tesla is well known for pushing boundaries, especially CEO Elon Musk.
For example, Tesla’s infotainment systems offer games on the giant screens playable with the foot pedals and steering wheel, turning the vehicle into a giant arcade game.
The infotainment system can also change the GPS screen to show the surface of Mars (as if you’re driving on the red planet like a Mars rover).
You likely won’t see that on cars from traditional brands.
Bruce Wayne-like Elon Musk shares the company’s quirks.
The “Musk Model 1”, for example, is a handheld flamethrower sold by Elon Musk.
In 2018, Musk launched his Tesla Roadster into space, making it the first production car launched into space and first to orbit the sun. The driver, “Starman”, is a mannequin dressed in a spacesuit. The Roadster was previously owned by Musk which he used to commute to work.
At the time of writing, the Roadster is 290,600,000+ kilometers from Earth.
Speaking of space travel, Musk is also vocal about his plans to inhabit Mars by creating a colony of people living on the planet. His company, SpaceX, has it all planned out.
Tesla products are also pretty attractive
The company is an expert at creating hype and delivering products that appeal to consumers.
For example, in May, 2015, a Tesla Model X (the SUV vehicle), made history at the Melbourne Airport when it towed a Boeing 787-9 nearly 300 meters. It scored the “heaviest tow by an electric production passenger vehicle" as per the Guinness World Records.
Often, buyers make purchases without even test driving a vehicle, sometimes paying before they even see a picture!
Tesla is struggling to keep up with demand for its vehicles and chip shortages aren’t helping.