Tesla Now Exceeds BMW In Valuation: Which Automaker Is Next?

NOV 8 2018 BY ERIC LOVEDAY 62

It might not last for long, but this literally just happened.

The big news a while back was Tesla overtaking Ford. Now, the electric automaker has surpassed yet another legacy carmaker in value.

In Q3, Tesla reported its first-ever profit. Shortly thereafter, BMW reported reduced profits on the grounds of high spending for research and development (some of which is tied to electric cars).

With Tesla moving up and BMW on the decline, the electric automaker’s market cap pushed past BMW for the first time ever.

Per the Tweet below, “Meanwhile crosses BMW in market Capitalization. Now the 4th most valuable Automaker in the world !!”

And just in case you were wondering which automaker might be surpassed next, that DDAIF is Daimler, who’s not out of reach.

Here’s the status as of 12:30 PM Eastern time:

Categories: BMW, Tesla

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62 Comments on "Tesla Now Exceeds BMW In Valuation: Which Automaker Is Next?"

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KumarPlocher

I had no idea Toyota was valued so high!

Alaa Sadek

I had no idea that Ford is so cheap.

Ziv

Ford is a bargain. Or would be, if they hadn’t made the bone headed decision to ax nearly all their car/sedan production.

Bryan

Might not be a bad idea, as long as the intent was to clear the decks for BEVs in 2020.

Clive

It was a brilliant idea.

Will

Nope. Just trying to merge with VW

Paul Smith

Wal-Mart products are bargains too, if you consider cheap a bargain.

Clive

The cheap always comes out expensive.

Clive

ZIV…

It’s the best thing their CEO could do.

agzand

Market cap doesn’t reflect the debt load of the company. I wouldn’t touch Ford stock with a 10 foot pole.

MoMac

I wouldn’t buy Ford either, but much of the debt is from their financing arm, which acts similar to a bank. And banks, by their nature, require a lot of debt.

Ford’s debt needs to be looked at in two different ways. The debt of financing subsidiary(ies) and the non-finance debt.

Jim Whitehead

Some insight from a long-term Tesla Investor: We love Tesla’s growth and are awed by the products. We are happy to get ~25% stock gains per year, while most in the market are happy with 7% gains. We take “big” risk according to the bears, who are nor hurting badly. We want to hold this fast-growing tree until its a mighty oak. Old trees have stopped growing and have a great risk of falling in the next storm. One more big recession and they may fall for good, without a bailout.

CarGuy

Can’t figure out why. Their new products are sub par. Guessing it is because of goodwill from the quality products they use to make. They will fall when people figure it out.

Jason

The correct way to value a company is to use Enterprise Value.

https://en.m.wikipedia.org/wiki/Enterprise_value

The EV includes *all* forms of capital including operating leases, deferred taxes that act like capital, etc

Market cap is just the value of publicly traded stock and you have to be wary of currency translations for BMW, Toyota, etc whose value may be inflated if it’s currency is strong against the US dollar.

Going off my cloudy memory, I don’t believe Toyota uses that much debt so most of its EV is Equity like market cap.

And for Ford, you have to adjust the EV for pension and non-pension related items.

In summary, think of EV as a pie that represents the “capital” or who has claims on the company. Ford has a low market cap because it has to paid its pensioners and related medical costs and other benefits (it’s a line in the income statement) before Equity gets a cent for that fiscal period. Recall Equity is the residual claimant.

Al D

A large, very profitable manufacturer that focuses on top quality should be valued higher than the rest.

theflew

I’m not sure why you even publish stories like this. You say you’re not a financial site yet you show stock valuation which has little meaning in Tesla’s case. As high as it is today it can be just as low tomorrow. BMW, Toyota, GM, Ford are pretty stable day to day.

Dav8or

It’s a Tesla puff piece. They are popular here. Anything to promote the idea that Tesla is taking over the world.

Peter. L

Perhaps a little less whinging and a little more understanding that Tesla are not taking over the world, the idiot fossil companies are giving the world to Tesla. Well, after they have screwed it up by fiddling as Rome, sorry, the world burns.

Mark.ca

I’m on the troll’s side on this one….so I agree this piece is out of place.

Impartial Observer

You’re on your own side Marc.ca?

Pushmi-Pullyu

I guess you mean your screen name as a joke, Mr. Tesla Basher.

Impartial Observer

How exactly am I bashing Tesla, Mr. 💩-💩?

Yup, thought it was actual assets, not market cap, lol. One recall and stock valuation could sink like a submarine.

Kbm3

So stating a fact is a puff piece?
Wow.

Dav8or

Yes. Because it is a meaningless fact and doesn’t indicate the true value of a company. It basically says that more people think they are going to get rich quick off of Tesla stock than they do with BMW stock. These people could be wrong.

It is a puff piece, but view it as you wish.

KumarPlocher

As a follower of EV news and Tesla in particular, I found this article quite interesting.

EV Ter

You should short tesla , based on your facts.

Paul Smith

Why do you think he’s so butt hurt?

Dav8or

I have zero interest in gambling, or day trading.

Shaun

Because it’s fun to see people like you and Dav8or get triggered and start foaming at the mouth.

Dav8or

Was my post foaming at the mouth?? Really?

MDEV

Are you hurting? It will hurt way more………

Will

Ford is not stable

pehash

Very stable when it comes to dividends. Though lately it’s going down steadily it may have hit the bottom by now. BMW also offers solid dividends quarterly. Over the last 3 years a BMW stock holder would be better off than a Tesla stock holder. Plus less risk of heart attacks when the CEO says something stupid.
That may change if Tesla decides to share some of the profits with investors, but I seriously doubt that. So it all comes down to how much you want to believe that one car company will end up dominating the whole market. Which sounds.. ludicrous.

ffbj

Ford is stable, yeah right. Profit nearly fell by half in the second quarter as the automaker lost money in China, South America and Europe. There stock dipped down to almost $9.00 per share before rebounding to 9.60 or so.

pehash

Profit is profit..
In a world without profit there would be zero investors for new companies. Think about that..

Jason

No. Profit is what the Generally Accepted Accounting Standard tells us what profit is. In the US, Reg S-X applies for publicly traded companies.

In Econ 101, the instructor should go out of the way to explain accounting profit DOES NOT EQUAL economic profit. After 7 years as a Buy-Side Corporate bond analyst, the accounting profit follows economic profit. There is usually a lag between accounting profits catching up to the economics.

For example, Tesla is now mass producing Model 3 in sustainable numbers each week. How many ICE auto manufacturers took an accounting charge TODAY to reflect its company’s loss of value due to a new competitor and changing market landscape. In a few year, you will start seeing write-downs of asset values.

The same manure happened when iPhone overtook Blackberry for smartphones but it took months before Blackberry wrote down their assets to then current market value. But by then, Blackberry was TOAST!!

Jolinar

I really hope Tesla does not pay any dividents. It is better to reinvest the money and grow than getting rid of it.
I think that even when all cars are electric there will be better ways how to spend the money rather than paying divs.

Paul Smith

One company (Toyota) IS dominating the market….for now.

rey

Toyota is dominating in FOOL CELLS , a car they have to give away the “FUEL” otherwise nobody leases the car let alone buy

Rusty

“Plus less risk of heart attacks when the CEO says something stupid.”
““The diesel development from BMW perspective is quite dramatic. We have, I think, more or less the best diesels. All test show that we have the lowest emissions. We have a spiral in Europe where every politician sees only one solution – diesel bashing. From a CO2 and customer perspective, a modern diesel is a very good solution. Especially for heavy, high-performing cars – I have 85% in my portfolio in 2030 with a combustion engine – I think the discussion about electro-mobility is a little bit irrational.”
BMW AG board member Klaus Froehlich, Oct 2018.
“Thanks to a new production method available from 2020 onwards, BMW will be able to make all its cars with pure electric, hybrid, and combustion engined variants.”
BMW CEO Harald Krueger.

pehash

Yes. What’s wrong there? BMW indeed has some of the best diesel engines. EVs are the future, but many forget how this “electric revolution” started. We wanted cleaner cars. To save the planet. Now everyone races to build new factories, extract rare metals, build bigger cars and heavier cars (which require more road maintenance) etc. Where’s the Green promise? Driving a small diesel like the BMW 114d for 15-20 years (because BMWs are reliable like that..) is a great value proposition in this context. BMWs switch from diesel to electric happens because the EU doesn’t have a clear strategy on the subject and people have been deterred from buying diesel cars for years with huge fuel excise (diesel is more expensive than petrol in all EU countries though it’s a lot easier to refine).

antrik

Diesel is more expensive than gasoline? Are you trying to be funny?…

Dorian

It may be more easy, but you get significantly less from a barrel on oil. Diesel real price should be double from what it is right now.

Jason

Dividend theory was debunked by Miller using the synthetic dividend argument. Miller was able to show that an investor can create synthetic dividends from a company that does not pay dividends and therefore dividend HAS NO impact on company valuation. Great & seminal argument way ahead of its time.

A more advanced form of the argument can be found in the M-M theory of capital structure.

https://wps.pearsoned.co.uk/ema_ge_berk_cf_2/148/37903/9703184.cw/content/index.html

https://www.investopedia.com/walkthrough/corporate-finance/5/capital-structure/modigliani-miller.aspx

Btw, M-M theory has flaws because it ignores distress costs as a company increases debt, respectively, but nonetheless M-M provides a great framework to understand capital structure and valuations.

Remember whenever a company pays a dividend, it loses that equity valuation = amount of dividend. Second, offering dividends signals to investors that the company cannot earn adequate return on capital on those earnings and puts the reinvestment burden on the investor.

antrik

Tesla’s current stock price doesn’t reflect a notion that they will dominate the market — not even close.

ffbj

As the bans start coming in, I think German auto makers are in the worst shape, as they produce diesels, and went all in on them years ago. A bad business decision as it turns out. Daimler will probably fall below Tesla in market value in six months or so.
https://www.reuters.com/article/us-germany-emissions-factbox-idUSKBN1ND1ZV

Taylor Marks

Daimler (DDAIF) is only ~5% higher than Tesla, so it seems like a good day for Tesla or a bad day for Daimler is all it’ll take for Tesla to overtake them. Probably less than 3 months until they’re ahead.

Overtaking VW and Toyota will take a good deal longer – probably another year for VW, and multiple years for Toyota.

Jolinar

Tesla will have to show consistent profits first. But yea, several years from now, it could happen.

SJC

So called valuation does not reflect the value of the company.

Mark.ca

Yes, it’s a guess on the possible future value of the company.

Mint

Yup. If you wait for a company to prove its worth before investing in it, you’ll be lucky to make any money at all.

arne-nl

In financial terms, market cap is the value of a company. By definition. And ‘value’ implies all future prospects.

Or do you cryptic words mean something else?

Chris O

To turn this around BMW might want to show us a serious Model 3 fighter like right now, where is it? Model 3 has been in the works for so many years and yet BMW, arguably Tesla’s closest legacy competitor has nothing?

Prsnep

Model 3 isn’t end all and be all. BMW has plug-ins in other vehicle classes in with Model 3 is not a direct competitor.

ffbj

The model Y should be out by then and then Tesla’s model would cover most drivers needs, in the passenger vehicle department, though there still would be space for a competitive ev BMW to take some market share.

Chris O

3 Series is BMW’s bread and butter model so far produced in the same sort of numbers Tesla is shooting for with Model 3. It remains to be seen how much of the lower luxury class market remains for BMW with an brand new competitor dumping another 500K/year cars in it. With Tesla’s range expanding and luxury class buyer clearly developing a taste for all electric BMW seems ill prepared to deal with the upcoming changes.

F teo

The fact it, a large number of Model 3 trade-in customers come from Civic, Prius and BMW 3 series cars that were considerbly cheaper in price. It shows the UNUSUAL attraction of these class of customers towards Model 3 that the market has never seen before. It gives cause of concern for those other manufacturers.

ffbj

I think they (the Germans) have interiors, design, and possibly handling, though the Model 3 is no slouch in that department, but in everything that speaks as an electric car: Battery, Drive Train, Electronics, OTA updates, charging networks, and even availability, Tesla is in the lead by a good margin.
I think the IPace is a valiant effort, though it falls measurably short in the efficiency & range department.
Tthe vaunted invasion of German ev alternatives is more mythical than realistic at this point.

Kbm3

A BMW Model 3 fighter would be a 3 series (ICE version) killer.’

I.e. tons of effort just to cannibalize themselves.

Tesla is positioned so well compared to all of the incumbents.

Al D

Yes, we know Tesla’s stock is way overpriced. That’s why so many people are shorting it.

MoMac

“With Tesla moving up and BMW on the decline, the electric automaker’s market cap pushed past BMW for the first time ever.”

First time ever?

Yet I found a Bloomberg article with the headline, “Tesla Just Passed BMW in Market Cap” — dated June 9, 2017!