But Tesla’s market capitalization is higher than the combined total of Toyota, Volkswagen, Daimler, GM, BMW, Honda, Ford, and Fiat-Chrysler. The zoo has gone nuts.
By Wolf Richter for WOLF STREET.
Tesla announced today that it finally almost reached 500,000 deliveries in a calendar year, with its 499,550 vehicles delivered globally in 2020, and that it finally hit its target of producing 500,000 vehicles a year – two years behind its promises. Back in May 2016, it had promised in its quarterly report that it would produce 500,000 vehicles in 2018.
But it didn’t happen in 2018, far from it, and it didn’t happen in 2019 either. It finally happened in 2020. That promise in May 2016, like so many of Tesla’s and CEO Elon Musk’s promises, had caused its shares to surge.
Every promise Tesla and Musk issue is worth many billions of dollars in the company’s market capitalization, which then allows the company to raise many more billions of dollars by selling more shares. In 2020 alone, it raised $12.3 billion through share sales, on top of the $20 billion or so it had raised since its IPO.
Never mind that these promises either don’t happen at all, or happen finally years behind the promised date, by which time many more promises were issued that drove the shares even higher, allowing the company to raise many more billions. Musk walks on water, and the SEC is blissfully asleep.
This 500,000 in deliveries globally is a big number for Tesla. But it’s a minuscule number in the overall global auto market, which in 2020 is estimated at 73 million deliveries. Tesla’s global market share in 2020 has reached a whopping 0.7%.
Tesla doesn’t even rank in the top 20 automakers. It’s a small automaker, it’s growing, and that’s good especially in a year like 2020, but it’s just very small. Someday, Tesla might achieve a global market share of 1%.
At the close of trading on December 31, Tesla’s share price of $705.67 created a market capitalization (share price times outstanding shares) of $669 billion. Its market cap is now bigger than the combined total market cap of Toyota (Toyota and Lexus), Volkswagen (VW, Audi, Porsche, and many other brands), Daimler, GM, BMW, Honda, Ford, and Fiat Chrysler Automobiles. And each one of them blows Tesla away in vehicle sales. What a sight:
Tesla did accomplish a huge feat, however: It shook up the legacy automakers and got them to take EVs seriously. This is a true feat. GM and others dabbled in EVs years before Tesla came along, and EVs have been around since the 1800s when they competed with steam-powered cars, but the modern automakers vacillated between laughing off EVs and focusing on diesels and how to cheat on diesel emissions tests. But they finally got it. And that’s Musk’s doing.
They’re all now producing EVs. And prices are coming down. Tesla has cut prices throughout 2020 to remain competitive. This has resulted for the first time in the makings of a real market for EVs, with lots of innovation and pricing pressures all around.
EVs are a lot simpler to assemble than ICE vehicles. EV powertrains are cheap compared to ICE powertrains. Battery technologies have been advancing rapidly. And the charging infrastructure is getting built out for people who cannot charge their EVs at home or at work.
But this is also producing enormous turmoil in the legacy auto industry that will spread over the next few years, including large-scale job destruction in the global components industry that is supplying assembly plants of internal-combustion-engine (ICE) vehicles; and it is creating different but far fewer jobs in the EV space.
Legacy automakers are now investing billions of dollars each in EVs. Volkswagen alone earmarked $86 billion over the next five years to EVs. They finally got it. And they will see to it that Tesla remains a small automaker. But Tesla’s share price is another sign that this zoo has gone totally nuts.
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