Tesla’s current market cap makes it the most valuable automobile company in the world. By that metric it is 3 times the size of Toyota and 4 times the size of Volkswagen.
If we consider Tesla’s relatively limited manufacturing scale, the valuation simply doesn’t make any sense in present day terms. With regards to revenue generated from automobile sales, it is far behind the pack. It remains the child of the industry.
Part of the companies inflated valuation its clear leadership in the still emerging electric vehicle market. Cornering nearly a quarter of the international market, its has more than 3 times the market share of the second placed company.
The electric car revolution is still coming.
Take last weeks news, where American President Joe Biden announced a $174 billion investment “to win the EV market’, within an enormous $2.25 trillion infrastructure plan.
For the US to win the EV market, Tesla has to win.
For the US to win the EV market, Tesla has to win.
Earlier this month, the UK Government announced that all petrol vehicles would be banned by 2030 to enable in swift transaction to widespread EV adoption.
At the present moment, less than 3% of cars on the road in the UK are electric. The remainder are petrol and diesel. Within the decade these will be extinct.
The future of automobiles is electric. That is clear as day.
As electrification sweeps over the automobile industry, we can expect Tesla to continue to from strength to strength.
Of course, competition is coming swiftly, and Elon Musk’s firm grip over the EV market will wane, but as production ramps up with the ongoing development of more Giga-factories, we can assume that Tesla will remain in a strong position in the coming decades. To my mind, more than anything, Tesla’s brand will insulate it from competition.
I can use the example of Apple to explain my confidence.
Much like Elon Musk and Tesla has done with EV’s, Apple, with Steve Jobs at the helm pioneered the smartphone market with the launch of the iPhone in 2007. It was the first product of its kind in that it combined a high performing mobile telephone, with a direct and simple access to the internet, and a high quality music playing device all in single device.
Since then, other companies like Samsung and Huawei have entered market with similar products and have lessoned Apple’s smartphone dominance. There is a strong argument to say that both asian companies produce and sell technologically parallel products to Apple at significantly cheaper prices.
Nevertheless, for the everyday customer Apple is Apple.
People are still willing to pay a premium for the latest iPhone.
Over the years Apple have cultivated a brand able to withstand competition and remain price resistant.
I think Tesla will follow a similar pattern in the Electric Vehicle market. It is well on its way to brand that resonates at the same elevated frequency as Apple.
Today, consider that Tesla’s share of the EV Market has come with 0 Advertising spend.
Like Apple was when it was pioneering the smartphone market, Tesla is led a charismatic, culturally relevant founder, with an uncanny finger on the pulse of popular culture. Both company have always kept a 100% focus on creating the highest quality products and aesthetic.
Tesla’s brand will a moat for competition.
