Elon Musk Justifies Tesla’s $1T Valuation By Pointing Out It’s More Than 12 Companies In 1
Tesla, just a few years back was a struggling startup on the brink of bankruptcy. However, now the EV maker is the most valuable automaker in the world and has a market valuation bigger than that of the next 10 largest carmakers combined.
This is a far cry from the Tesla of 2018. Back then, in the midst of the Model 3 ramp and the ensuing challenges, Musk was attempting to sell Tesla to Apple to save the former from bankruptcy.
At the time, Musk reached out to Apple CEO, Tim cook to discuss the possibility of the tech giant acquiring Tesla for $60 billion. That’s one eighteenth its current valuation of $1 trillion. And Apple with over $200 billion sitting in the bank could have easily bought Tesla.
However, lucky for Tesla investors and Elon Musk, Tim Apple refused to even take Elon Musk’s call. And now, in mere 4 years, the discussion has shifted to when Tesla will overtake Apple as the most valuable publicly-traded company in the world.
During the darkest days of the Model 3 program, I reached out to Tim Cook to discuss the possibility of Apple acquiring Tesla (for 1/10 of our current value). He refused to take the meeting.
— Elon Musk (@elonmusk) December 22, 2020
This is all incredible performance on Tesla’s part. And the EV maker is also showing no signs of slowing down as evidenced by its latest record quarter.
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However, as Tesla has grown in capacity and valuation, there are a couple of challenges that have cropped up. First, as Musk recently pointed out, Tesla’s scale has grown so much that “a good minute of thinking” about the EV maker’s operations amounts to a million dollars. Musk has said this fact makes him lose sleep and drives him to work “basically to the edge of insanity”.
And second, Tesla currently produces about 2 percent of vehicles made worldwide. However, the EV maker has a bigger market cap than the auto OEMs which produce 80% of the combined annual vehicle output. And this fact has led to people claiming that the EV maker is wildly overvalued.
On the face of it, this sounds like a fair criticism. However, stocks are not valued on their past performance but rather on their future promise. If it was the former, stock picking would just be an exercise in simple addition and multiplication and we will all be millionaires.
And this is the point Elon Musk is trying to drive home with his latest tweet. In response to Bitcoin advocate Anthony Pompliano, who called Elon Musk the GOAT for creating 6 companies valued at more than a billion dollars and 1 at over 1 trillion dollars, Musk made the point that Tesla is even more impressive as it is “a dozen or more startups if you look at all the things created from scratch that aren’t present in other car companies”.
If you closely observe Tesla, Musk’s statement becomes easy to understand. Currently, Tesla is the most vertically integrated volume automaker in the world. For example, Tesla makes every part of its electric drive train in-house, including the motors, the power electronics, and the battery pack. Recently the EV maker has even forayed into making its own batteries.
Most automakers, for instance, buy these components from third-party suppliers which are in their own right valued in billions of dollars.
Tesla also makes self-driving hardware and is working to be the first entity to solve real-world AI and level 5 autonomy. Most automakers outsource these tasks to other multibillion-dollar companies.
The EV maker is also working on an exciting new humanoid robot, named Optimus. Musk has recently said Optimus will bring about an age of abundance and in the long run will be bigger than the vehicle business. Which makes it another multibillion startup included in Tesla.
On top of all these, the EV maker uses an in-house built sound system in its vehicles and makes other usually outsourced parts like car seats in its own factories. And to add the cherry on top, Tesla is also looking to disrupt the mining industry by entering into sustainable lithium extraction and refining at scale.
And when you add all these together, it becomes easy to see why Musk calls Tesla more than a dozen startups in one. Personally, the way I see Tesla is, that if all the ventures succeed, Tesla will be less of an EV maker and more like U.S Robotics in the iRobot movie starring Will Smith.
In the movie, which is an adaptation of Issac Asimov’s novel, we see U.S Robotics being the most dominant company in the world supplying everything from robots that do house chores, to construction, police force, self-driving vehicles, and everything in between. And when you look at Tesla in that sense, the EV maker seems wildly undervalued at a $1 trillion valuation.
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As of now, it’s hard to definitely say that the EV maker will live up to the high hopes investors have put on it. However, we will be sure to keep you posted as Tesla continues to hit more milestones. Until then, make sure to visit our site torquenews.com/Tesla regularly for the latest updates.
So what do you think? Do you agree with Musk’s assessment of calling Tesla more than dozen startups in one? Also, how big do you think Tesla could get by 2030? Let me know your thoughts in the comments below.
Image: Screenshot from Elon Musk’s TED Talk Interview
For more information check out: Tesla Hits Again: Megapack Battery Park And Solar PV For Powering Boulder City, Nevada
Tinsae Aregay has been following Tesla and The evolution of the EV space on a daily basis for several years. He covers everything about Tesla from the cars to Elon Musk, the energy business, and autonomy. Follow Tinsae on Twitter at @TinsaeAregay for daily Tesla news.