Daily Outlook

Overpriced Tesla Won’t Be Most Valuable Carmaker for Long

Tesla hit a milestone Wednesday by surpassing Toyota’s market share to become the world’s most valuable company.

The company’s market cap swelled to $190 billion after its stock price soared above the $1,000 mark. Although Toyota’s market cap is around $215 billion at present, the Japanese automaker’s valuation includes Treasury assets worth about $30 billion.

Early last month, Musk indicated that Tesla’s stock price was too high. After the comment, TSLA dropped slightly below $700. It has since surged by roughly 50% from its May low. Despite the recent surge, Tesla’s leadership position is unlikely to last much longer for at least three reasons.

For years, Tesla was unrivaled in the world of battery electric vehicles (BEV). That has changed now with fierce competition emerging from all sides, forcing Musk to take a reactive stance. Days after hydrogen-powered auto startup Nikola went public and announced a timeline for its semi-trucks, Musk revealed that the Tesla Semi would soon be going into volume production.

Amazon-backed electric car startup Rivian, on the other hand, will start delivering its R1T next year. Legacy carmakers like Ford are also aiming at Tesla. The Detroit auto giant will be launching the electric version of the F-150 within 24 months. With the pressure getting to him, Musk has taken to bashing rival technologies.

On Thursday, Musk trashed Nikola by branding hydrogen fuel cells as “fool sells.” This was in response to comparisons made between fuel cell vehicles and battery electric vehicles. There are worrying signs of waning brand excitement in some of Tesla’s most established BEV markets. For instance, in Norway, the Model 3 was outsold by five other models. But in April, Model 3 sales fell to 19th spot. The Audi e-tron was Norway’s best-selling BEV in the first quarter.

A similar trend was evident in the U.S., where growth was stagnant. In 2019, Tesla recorded a 0.3% increase in sales in the overall luxury car market. Tesla bulls like to argue that the company’s steep stock price is based on the company’s superior battery technology. But this argument will be impossible to justify moving forward. As Musk teases a one-million mile EV battery, rivals are either working on this or already have it. Last month, General Motors revealed that it is close to making a battery that could last one million miles without requiring a replacement. China’s Contemporary Amperex Technology already has a production-ready one-million-mile battery that it is willing to manufacture for any client.

Overpriced Tesla Won’t Be Most Valuable Carmaker for Long, CCN, Jun 12

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