Tesla Market Cap More Than Market Cap of Toyota, BYD, GM, Ford, Hyundai, Kia, Mercedes-Benz, Stellantis, Geely, Ferrari, BMW, Volkswagen Group, Honda, Nissan, Renault, XPENG, and NIO Combined

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I just caught up on comments under an article I wrote several days ago, “Is Tesla Really In Trouble This Time?” There were many great comments from readers, but a few jumped out at me to stimulate this followup piece. The first one came from vensonata, who wrote:

“The combined value of all car companies in the world excluding Tesla is about 1.3 trillion USD. And Tesla’s market cap is just that. So if Tesla made all the cars in the world it would justify its present market cap. And if by some miracle they manage to make true fully self driving cars, it would not increase the money spent on cars, because buyers of cars are already maxxed out. And hasn’t Elon said that these robotaxis would be less expensive rather than more expensive? So the amount of money available in the entire world for purchasing cars doesn’t justify the most hyper optimistic vision of Tesla. In fact the opposite becomes clear. Tesla has no possible strategy to justify its value at anything above say BMW which produces about the same number of vehicles with a good margin, and has market cap of 88 billion USD.”

It’s a fascinating series of points and argument. I’ll come back to some of the points, but to start off, I was surprised by the opening statement, “The combined value of all car companies in the world excluding Tesla is about 1.3 trillion USD.” Has it really gotten to that?!

I don’t know all the automakers of the world, but I ran through a bunch of them and collected their market cap totals following the close of market today. Here’s what I found (values in billions of USD):

Adding up the market cap of all of those automakers except Tesla, I got $1,161.11 billion. That’s still about $130 billion short of Tesla. So, yeah, vensonata is right….

Then we get to the extreme theoretical: All of those other companies shutting down and Tesla selling all the cars in the world. Would Tesla’s valuation then make sense?

Of course, the stock is worth whatever people will pay for it, and Tesla’s market cap is so high because its stock price is so high. There’s the idea that the future of Tesla is bright (which may or may not be true) and the futures of these other automakers are dim (highly unlikely across the board, especially when you consider their sales trends and notice Tesla has had one of the worst sales trends of the past couple of years while several other automakers have seen their sales grow).

Frankly, it’s really hard to explain Tesla’s market cap. That’s where some other great comments come in.

“Tesla and Musk have convinced a heck of a lot of investors to view Tesla as a speculative startup bet and ignore the declining vehicle sales,” a commenter named Michael wrote. “But it doesn’t appear that even the institutional investors are demanding the protections or risk premiums that a typical venture capital investor would be looking for. I believe that this is likely to end badly for a lot of investors, but I hesitate to predict when. A stock collapse will require a change in market psychology, and its hard to predict when they occur.”

Elsewhere, in response to another commenter, he expanded on this. “I think it’s fine to make a speculative bet on the future. I’ve spent most of my career in tech startups, and have done that repeatedly. The odd thing about Tesla is that investors aren’t demanding a risk premium in line with the level of speculation involved. Or to put it another way, the stock is priced assuming future success, rather than a significant potential for failure.”

There are several great points there. Starting at the end, though, that is one of the things that’s quite weird — and makes me and others feel like TSLA is a bubble on the verge of bursting. It also gets to the point of vensonata’s comment. The market cap is basically assuming Tesla achieves all of its dreams and then some. It doesn’t assume Tesla’s sales trend from the past two years (a long-term sales decline) is going to continue, but assumes the company will actually flip to sales growth again and that growth will explode. Forget 2 million vehicle sales a year (a target Tesla almost reached before its sales started dropping), it will achieve 20 million! Or 30 million! Plus all those robots people will buy for $30,000+ each.

I mean, it’s so fantastical that it’s hard to believe.

And there is basically no caution built into the stock price and market cap to consider the possibility of Tesla not seeing explosive growth again, not achieving its extreme, unprecedented targets.

People seem to just be thinking “Oh, Tesla is winning, I need to buy Tesla stock.” Or “Tesla is going to lead us into a new tech future, I need to buy Tesla stock.” This is despite Tesla sales dropping significantly in recent years, the company repeatedly missing CEO Elon Musk’s robotaxi targets and promises, and competitors getting better and better — in all of the categories Tesla competes in.

Even assuming Tesla succeeds and sells 2–3 million robotaxis a year, or let’s be wild and say 5 million, does a market cap of $1.3 trillion make any sense?

As Michael says, “But it doesn’t appear that even the institutional investors are demanding the protections or risk premiums that a typical venture capital investor would be looking for. I believe that this is likely to end badly for a lot of investors, but I hesitate to predict when.” Yes, the lack of caution from institutional investors is a bit shocking, especially after they took so long to see Tesla as anything but a big risk. But here’s the kicker: “A stock collapse will require a change in market psychology, and its hard to predict when they occur.” Some kind of mass thinking about Tesla has to shift for things to change much. The basic idea around Tesla has to go through a transformation. Right now, it’s seen as some bright, young, but giant startup that is destined to succeed at disrupting market after market. The concept of the company has to change significantly for the stock price to drop in a similar manner. And who knows when that would happen?