As of this writing, May 25, 2022, Tesla is worth 640 billion euros on the stock market. Toyota, the second best-rated automaker on the stock market, is worth “only” 207 billion.
In 2021, Toyota sold 10.5 million vehicles. Tesla broke its record by producing 930,422. And again, these valuations take into account the sharp drop in Tesla stock since the beginning of the spring, since on April 4 the company was worth around 1,000 billion dollars.
How to explain such a high stock market value compared to the actual sales of the company? According to the New York Times, for this to be justified, it would have to “dominates the auto industry the same way Apple rules smartphones and Amazon rules e-commerce”. However, this is not the case – far from it.
For investors, it’s all about potential. And for many, that of Tesla is infinite. The company has not limited itself to making the electric car a desirable product: it continues to innovate, in particular concerning automatic piloting.
When all is well, Elon Musk is Tesla’s greatest asset. The richest man in the world succeeds better than anyone else in capturing media attention and is considered by many investors to be a visionary, always in search of a new technological challenge to take up.
Only, when everything goes wrong, the charismatic billionaire quickly turns into a thorn in the side. As the tech industry tumbles, Wall Street wonders if a cool-headed board of directors might be better than the posturing of a CEO trying (or not) to buy Twitter, while his company unscrews on the stock market.
Stay without dominating?
A sluggish market, a race discrimination lawsuit and sluggish production have investors and some observers wondering: Are Tesla’s development prospects really that great? Consumers are certainly more and more convinced by the electric, but the competition is fierce.
In the United States, where Musk and his company are extremely popular, consumers are prepared to wait months for their Tesla. Only, “the next generation of buyers will be the average person who buys an electric because it’s cheaper, predicts an analyst with the New York Times. Tesla’s brand image will be less effective.
Tesla is going to be the next WeWork.
If you look at the history of Tesla’s stock price, it was never based on car sales. It’s always been based on hype from Musk and a vision for a future.
That vision was appealing to many, including liberal environmentally-conscious nerds.
— Brianna Wu (@BriannaWu) May 22, 2022
All this leads the market to reassess the company’s prospects, even if it means considering a brutal return to earth. This is reminiscent of the scenario that brought down WeWork in 2019.
The start-up, which sublets coworking spaces, had a high-profile CEO, a capitalization of $47 billion and a business plan a little too ambitious: after a dizzying fall, the company is now worth 4.8 billion.