Is Tesla Actually Worth Half-a-Trillion Dollars?

Last week Tesla sent shockwaves through the automotive industry when the company’s share price rose 4.6% to just over $545 (as of this writing it's over $580). A company that just five years ago was struggling to get by and according to CEO Elon Musk was on the brink of bankruptcy, is now nearly more valuable than every other automotive manufacturer combined. In a few days, Tesla added more than $52 billion to its market cap equivalent to roughly 1.5 times Ford Motor Company’s current valuation. Currently, Tesla’s valuation is more comparable to Amazon or Apple rather than General Motors or Volkswagen. With all the positive news coming out it does lead one to wonder is Tesla actually worth that much? 

The Automaker

If we’re looking at Tesla from an automotive perspective the simple answer is no it’s nowhere near that valuable and is destined to crash. How could it be, Tesla didn’t even outsell Volvo last year and has yet to crack 500,000 deliveries in a year. Even completely owning the EV market, Tesla can’t compete with any of the large automakers in terms of manufacturing and it’s unlikely they ever will. 

Comparing Tesla to the world’s largest automaker, Volkswagen AG, shows a stark difference in scale. Volkswagen consistently delivers over 10 million vehicles every single year, something that’s probably a decade or more off for Tesla. Not to mention Tesla doesn’t have the strongest track record when it comes to production quality. Famously getting into spats with Consumer Reports about build quality, ranking last in overall quality by J.D. Power, and has quite a few meme-able road failures. To say Tesla lags behind in the production department is a massive understatement and is something that will take a very long time to overcome.

So what gives? As an automaker, even with the most generous of multipliers based on the future value, it’s hard to come up with a way that Tesla reaches even a $100 billion valuation let alone half-a-trillion. Well, the answer is simple, Tesla isn’t an automaker. 

The Energy Company

For years Tesla short-sellers have been screaming the above issues from the mountain tops, rightfully pointing out that any automaker that can’t consistently build quality vehicles isn’t worth much. The problem is, they and much of the world overlooked what was actually being built at Tesla. It’s not an automaker but an energy company. 

The vehicles have always been more a proof-of-concept rather than the end goal. They served as a testing ground to showcase the battery technology they’ve been building out and now have quite a sizable lead. Once they laid the groundwork for the Supercharger network it was easy to see that the vehicles were simply a means to an end, Tesla wanted to be Exxonmobil and General Motors combined. As the years have gone on the company has acquired SolarCity, introduced the powerwall, and begun showcasing its massive storage capabilities, dubbed the megapack, in Hornsdale, Australia. 

Tesla wants to upend the entire energy industry just as it did with the automotive and its unlikely to slow down any time soon with the Tesla roof finally starting to take shape it's easy to see a future where nearly every house has Tesla in the garage, on the roof, and attached to the wall. So while Tesla probably isn’t worth $500 billion right now, it's very easy to see a future where one day Tesla worth quite a lot more than that.