Tesla Model 3
Yes, Tesla's market cap surpassed a luxury German automaker that trades at high value, demands premium prices, and enjoys large margins.
When Tesla first passed Ford's market cap, it was a big deal, but Ford trades low, and it's not really a Tesla competitor in any way. The bigger news came later, when the electric automaker passed General Motors. Again, GM trades much lower than the Silicon Valley automaker, but the company is seen as substantially more successful than Ford, and has a Tesla competitor (two really) in the current market; the all-new Chevrolet Bolt, and the largely successful Chevrolet Volt.
or range. The company will have more options in the future, but it will be 2020 or later before that comes to fruition.
Tesla isn't in the market to compete with the likes of Ford or GM (despite the fact that the Chevrolet Bolt has a range and price on par with that of the upcoming Model 3). Instead it gears its vehicles toward the luxury market. The upcoming Model 3 will sit alongside the legendary BMW 3 Series in terms of price, size, and dynamics.
BMW has the potential and the resources to do exactly what Elon Musk and company are doing, and while the German automaker is beginning to make strides -- it's going to be more than a few years before plans come to fruition.
This week, Tesla shares jumped 1.9 percent to pass BMW's market value of $61.3 billion. It was short-lived due to Hedgeye Risk Management's suggestion to short Tesla stock. The stock dropped 3.4 percent and closed below BMW's cap. It's likely though that the electric carmaker will pass BMW once again and perhaps stay ahead. Analysts are estimating $400+ prices in the near future.
Skeptics still feel that Tesla's shares are not representative of reality. When you look at profits and sales, BMW sold 2.4 million vehicles last year and the electric automaker sold about 80,000. BMW made $7.7 billion and Tesla lost $725 million. It costs BMW $59 billion in property, plants, and equipment to net $104 billion in revenue. Tesla spends about $6 billion to net $7 billion. Well-known investor, Jim Chanos, shared:
“We think they are going to be burning close to $750 million to $1 billion a quarter for the next handful of quarters.”
“has its big test ahead of it, the Model 3. It has been losing money selling $120,000 cars, but it hopes to make money selling the $35,000 car.”
The big kicker will be if we see a true transition to electric vehicles, sooner than later. If this becomes the case, Tesla has every advantage to lead. BMW and other German luxury automakers, as well as companies like GM and Ford, have a substantial amount of capital tied up in ICE vehicles. Transitioning to compete with the electric automaker will prove no easy task.
It's becoming more and more obvious that people are fans of Elon Musk, and the Silicon Valley electric startup. However, the population still needs to prove that they are also fans of electric cars.