Hacker News Reader

Comment by grecy | Hacker News Reader

> Tesla stock is not valued based on its underlying fundamentals

I'm no Musk fan with his latest comments, but I disagree with this quite strongly.

Have a look at how many vehicles Toyota have produced for the last 10 years, and have a look at their stock price. Take a guess at their stock price in 10 more years. It's a flat line

Now have a look at the number of vehicles Tesla have produced in the last ten years. Now guess at their stock price in 10 more years.

There is a chance Tesla will make 20 million vehicles by 2030. If they do, their stock price will go up a lot. There really is not much chance of Toyota doing that. (they're not trying to)

View on HN

Yea, I’m no Musk fan either but declaring Tesla overvalued simply because of Musk’s presumed appeal is just lazy.

Sure. It's lazy and correct.

This is a good point. The fact that stock prices are not connected to output with car companies is an indicator that the market is rational. This explains why the appeal of the Tesla figurehead is not a factor

There is $254.20 billion in Toyota shares and they made 8.7 million cars in 2023. Tesla's market cap is $744.17 billion for 1.8 million cars, 14x higher per car.

If Teslas price were based on the possibility that they could eventually reach a bit over double Toyota's production, they wouldn't already be almost 3x more highly valued.

Missing from your calculation is the fact that Tesla makes almost 10 times more profit per vehicle than Toyota does, and is still growing sales at a much faster rate.

Market cap is much more closely related to total profit and future company outlook rather than a current snapshot of the number of cars sold.

Tesla doesn't have a huge backlog of vehicles to service and recall nor a ton of expensive lawsuits active, though they're getting there.

And they're not making any $20k car which is how they reach 20 million cars. Guess what the profit per car for those is.

They also don’t have dealer networks or unions, almost no debt, and have somehow maintained those high margins despite their low debt and rapid growth. It’s possible that by the time they start making the $20k car their margins will still be relatively high compared to other cars in the same price range.

I wonder how almost $200 billion in debt at these interest rates might factor into your calculations? Or were you not aware of Toyota’s debt?

https://www.statista.com/chart/27743/companies-with-the-high...

I wasn't aware of Toyota's (or VW's debt), but just raw debt numbers don't provide enough insight. Is it long term debt? Short term? What are the interest rates?

And again, let's see Tesla a few years down the line when political and social factors start weighing them down, too.

The big automakers have the profit margins they do not just simply because they're all dumb, as Tesla fanboys would love to believe, but because their environment is constrained by many things, primarily legislation.

My guess, Tesla will stabilize as a major car maker, maybe even #1 for a short period of time, and after a while the shine will wear off. They'll just be GM for the internet era.

But even just assuming 0% interest rate on that debt is still a lot better than ignoring it entirely. For simplicity you can add Toyota's $200 billion debt to its market cap to do a more apples to apples comparison with Tesla (since tesla only has ~$5 billion debt). So now we're talking $700B for Tesla to $500B Toyota assuming Toyota's debt is interest-free.

As for political factors, it seems that would only benefit Tesla vs the other automakers as Tesla only makes electric cars which is where many governments are trying to push consumers to. Other carmakers have to figure out a way to convert their ICE assembly lines to EV lines if we assume that we'll be moving towards a mostly electric future (which I believe, regardless if it's Tesla or someone else who takes us there).

A current snapshot of the per vehicle profit of a luxury car manufacturer versus a mass market manufacturer tells us even less. Suffice to say that if they were to scale sales to hit the multiple of Toyota's annual profit level implied by their respective market caps, Tesla would need to be selling cars for a lot less than $40k...

20 million annually? Because Toyota sold nearly 6 million cars in a year.

Yes. They did just under 2 million this year, and the goal is 20 million annually by 2030.

Even if they don't hit it by 2030, based on everything else they've done to date, I think it's likely they will eventually get there.

Reply on news.ycombinator.com