Even after having come off their highs in the recent months, the hopes placed into Tesla by the stock market are insane and utterly unsustainable. Even if Elon Musk would walk on water tomorrow, even if he would turn his foot-bath into wine and drink it, his stock would not be worth the money. Then why is it so high? It is said that Teslas are powered by electricity. Not true. Tesla is powered by pure hype. There is hope: The hype appears to lose its power.
| Market cap | Est 2014 units | |
| (billion $) | (thousand) | |
| Toyota | 200.9 | 10,350 |
| VW | 86.1 | 10,130 |
| GM | 52.8 | 9,850 |
| BMW | 59.2 | 2,076 |
| Tesla | 27.5 | 30 |
Reality check: Tesla is so tiny that it won’t make the table of the world’s 50 largest automakers anytime soon. The smallest maker of passenger vehicles on that list is China’s Haima, located on the romantic island of Hainan, and they made 61,000 units in 2013. Tesla will make half of that this year, if they are lucky. Wall Street did not get the memo: The stock market thinks Tesla is worth around half of BMW, or GM. (That huge GM is valued slightly less than small BMW is another story.) The market thinks that Tesla is worth around a third of the world’s second largest carmaker Volkswagen, a company that will sell 10 million units this year, and that is set to displace Toyota as the world’s largest carmaker in the coming year. Three Tesla would buy one Volkswagen, incl Audi, Porsche, Bugatti, Lamborghini, SEAT, ŠKODA, Bentley, Ducati, and a few trucks and buses from Scania and MAN thrown in.
Or to make it a little less mind-blowing: Tesla is valued today as if it would sell a million BMW-like cars tomorrow. Not going to happen. It took BMW some 70 years to get to that level. The first million is the hardest, but it took more than another 20 years for BMW to get to 2 million. Remember, Musk dreamt of BMW buying Tesla, BMW said nein danke. They know what car companies are worth.
The stock market values each Toyota sold this year at $19,400, it thinks a Volkswagen sold new this year is worth $8,500, the stock market only wants to part with $5,400 for each GM type vehicle sold worldwide. BMWs, closer to the hearts and wallets of stock traders, are valued at $28,500 a piece.
Price of a Model S in Wall Street terms? $916,000. If that continues much longer, consider an investment in Novartis, manufacturer of Clozaril, according to Wikipedia “the drug of choice for treatment-resistant schizophrenia patients.”
Tesla disrupting the car business? Please. Tesla sells cars (a more than 100 year old idea), powered by electricity (a more than 100 year old idea), at high prices (a more than 100 year old idea), through its own network of dealers (a more than 100 year old idea.) About 20 years ago, Volkswagen, for who I worked, was convinced that on-line dealers like Carpoint would seriously disrupt car dealers. I told them it wouldn’t happen (I charged money for the advice, you get it for free.) Remember Carpoint? No? Gone. Assimilated by MSN Autos, and that one, owned by Microsoft, hasn’t set the world on fire and burnt down the auto business either. Autonation, the other company we worried 20 years ago that it could destroy brick and mortar car dealers, today is the nation’s largest network of brick and mortar car dealers.
Disclosure: I readily admit that I know nothing about stocks. The few times I owned shares ended in rich brokers and utter disaster. I do not own Tesla stock, nor any other. I have no plans to buy any. I am 100% cash. I know, however, a little bit about the auto business. I have been in it for more than 40 years. I have seen huge car companies at the brink of disaster. In the 35 years I worked for Volkswagen, it was near-dead at least three times. I have seen many carmakers go down. I have seen many more who tried to become a big automaker, and who failed. The List of defunct automobile manufacturers of the United States should be a warning to all who try. It has more than 1,600 entries.
Just when I thought the world had gone totally gaga, sanity seems to make a come-back.
On a lark, I overlaid Tesla’s stock chart with its Google search traffic. I leave it to the chartists to adorn it with trend lines, Fibonacci curves, and leading indicators. All I see is that the interest in Tesla, as measured by Google search traffic, peaked at just around the time the Model S became halfway available. Search traffic has been down ever since. Interestingly, search traffic took a nosedive slightly preceding the recent drop of the Tesla stock. Again, I don’t know anything about stocks. Search traffic however is used as a predictor for auto marketers. Companies like Edmunds make a lot of money with that data.
To ward off the inevitable nitpickers, I did the same exercise with searches for “Tesla” alone. The picture is similar, but less pronounced. Keep in mind that this search includes all people who look for the true electric genius, Nicholas Tesla, the inventor of the Tesla coil, the induction motor, and the co-inventor of the alternating current. This also may explain that the city with the highest “Tesla” searches is Belgrade, capital of Nicholas Tesla’s home country Serbia (zero Superchargers and Tesla stores there), while searches for “Tesla Motors” are highest in San Jose.
In Belgrade, San Jose, and elsewhere in the world, the interest in Tesla appears to wane. Which is a good thing. Reason is a bit like gravity. Eventually, they win. However, as any shrink will happily confirm, insanity can be a bitch to cure.
Merry Christmas.
