How Big do you think TSLA will get and when?

aznt1217 said:

Wondering what people's thoughts are here. I was thinking about Elon's comment about being AAPL market cap size in the decade. AAPL is just about ~700B in market cap size as a point of reference.

Toyota is ~220B Market Cap
Honda is ~57B Market Cap

What do you guys think?

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I think Toyota and Honda are competing with the same technologies and their margins are being squeezed because their innovation does not give them a significant cost advantage over each other. If Tesla can hold mid-to-low teen net margins due to their lead a $1 trillion market cap is doable. It is impossible to call but I wouldn't use ICE vendors for comparison unless you think they will quickly catch up with Tesla's cost advantage and start competing and hurting Tesla's margins. My answer, of course, is that any guess I give will be wrong. I just think it will be a lot higher than it is now.

aznt1217 said:

Wondering what people's thoughts are here. I was thinking about Elon's comment about being AAPL market cap size in the decade. AAPL is just about ~700B in market cap size as a point of reference.

Toyota is ~220B Market Cap
Honda is ~57B Market Cap

What do you guys think?

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If I remember right, Honda makes about 4 million cars per year, Toyota about 10 million.

Elon has said TSLA could make a few million per year by 2025. This would make Tesla almost a Honda sized car company. Throw in much higher profits than Honda, energy storage, and super high growth that could continue until it is the largest auto producer in the world and you could get to the $700 Billion market cap by 2025 and higher after that.

Lots of things have to go right so I would not count on this but it is possible.

The model 3 and the gigafactory will be required for any large amount of growth. I would say the success of the Model X is already factored into the price.


Tesla ~33B Market Cap
Fuji Heavy Industries (Subaru) ~28B Market Cap


I expect consolidation of automotive manufactures. I think Subaru and Tesla would be a good match. Long term I think the many of the current automotive manufactures will become like Foxconn. They will not design the vehicles but will provide the parts bin and manufacturing.

aznt1217 said:

Wondering what people's thoughts are here. I was thinking about Elon's comment about being AAPL market cap size in the decade. AAPL is just about ~700B in market cap size as a point of reference.

Toyota is ~220B Market Cap
Honda is ~57B Market Cap

What do you guys think?

Click to expand...

The general business dynamic that I find most fascinating is the disruption of an established industry by a new innovator, and the inability of incumbents to react and defend their "turf". The incentives that have worked so well for BMW, Toyota, Honda, GM, Ford, Volkswagen, etc.. have turned upside down on them and are now working against them. I'm not talking about government incentives or something like that - I'm talking about economic incentives that play out in the little decisions they make every day. What new features to put into the 5-series BMW this year, and next year? What ideas will bubble up from the engineer's and designer's heads, make it through middle management, and eventually get a hearing and the possibility of becoming a change in a car that gets sold.

At that level of detail, what I see is a car industry made up of Tesla, a couple of also-rans that won't be driven all the way out of business (Nissan, BMW), and a bunch of Walking Dead. The biggest question in my mind is how does Tesla take advantage of all those factories and trained resources most effectively to help with their own volume ramp. My current guess is it'll be buying plants without labor contracts out of bankruptcy court, with workers at the plants receiving the opportunity to interview for a position (and reform a union afterwards if they elect to do so).


To answer the question - I see Apple at $183B revenue in 2014, with 70B gross income. That's 70/183 or 38% gross margins.

As a point of comparison, Tesla is definitely lower for gross margin. I think about the most optimistic assumption to be made for a well established Model 3 and beyond future is 1/2 of Apples gross margin - let's say 20% for a round number. Out of the $1T worldwide market, I'm starting to think its going to be half Tesla's if the rest of the world hasn't already gotten a move on. $500B revenue and 20% margins would be $100B gross income instead of $70B. I don't have an estimate for the stationary storage market beyond "it's bigger" than the auto and transportation market.

So here's one estimate for 50% larger than Apple's market cap. I guess that puts me down for $1T market cap compared to Apples $700B market cap today. And I'm simultaneously disbelieving how big the number is, and thinking I'm low by a factor of 2 or more. Big numbers. Probably not 2025 timeframe though - say 2030 or 2035, because things are going to start happening REALLY fast (in an extraordinarily big and slow changing market).


It's so huge that I don't really believe it, and yet I continue to see failure of anybody to seriously tackle the underlying problem that volume in this market necessitates. And I think that competitors have no idea of how fast their business is going to collapse on them when Tesla hits real volume.

One other factor that needs consideration is the Total Cost of Ownership (TCO), and how Tesla effectively captures that for its market cap. When the Model 3 comes out, not only will the total cost of ownership be lower for drivers due to lower maintenance cost and gas savings in comparison to an ICE vehicle, but Tesla will capture that benefit as well through higher average selling prices. Toyota, for example, would be able to charge a much higher price for their ICE cars if it took 9 dollars to fill up a tank. But it's not able to do that, so it must charge a lower price and split the revenue with oil companies. Tesla, on the other hand, captures the "consumer surplus" not only from selling cars, but also the LIFETIME consumer surplus from the electricity and gas savings. So if one wanted to fairly value Tesla, they would have to take Tesla as an Automobile OEM (Toyota, BMW, Daimler) + a % of the net savings from consumers paying the oil companies (Exxon, Chevron, Shell). Thus, because Tesla provides so much better value to the current alternative from a Total Cost of Ownership point of view, Tesla should have higher margins for years to come. That is why when people mention comparisons to other OEMs, it's not totally accurate. You should value Tesla's ability to capture consumer surplus relative to what's available.

TSLA_Hopeful said:

One other factor that needs consideration is the Total Cost of Ownership (TCO), and how Tesla effectively captures that for its market cap. When the Model 3 comes out, not only will the total cost of ownership be lower for drivers due to lower maintenance cost and gas savings in comparison to an ICE vehicle, but Tesla will capture that benefit as well through higher average selling prices. Toyota, for example, would be able to charge a much higher price for their ICE cars if it took 9 dollars to fill up a tank. But it's not able to do that, so it must charge a lower price and split the revenue with oil companies. Tesla, on the other hand, captures the "consumer surplus" not only from selling cars, but also the LIFETIME consumer surplus from the electricity and gas savings. So if one wanted to fairly value Tesla, they would have to take Tesla as an Automobile OEM (Toyota, BMW, Daimler) + a % of the net savings from consumers paying the oil companies (Exxon, Chevron, Shell). Thus, because Tesla provides so much better value to the current alternative from a Total Cost of Ownership point of view, Tesla should have higher margins for years to come. That is why when people mention comparisons to other OEMs, it's not totally accurate. You should value Tesla's ability to capture consumer surplus relative to what's available.

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This dynamic is one reason I feel I'm going low when thinking of Tesla as only +50% of Apple in 10 years. That sounds like an awfully good reason to hold with both fists

I think one thing people don't realize is just how big the car industry actually is. Ford alone sells about a million trucks in North America a year, and if I remember total world wide car sales is like 16 million a year. Even if car production peaked this year and started shrinking, if Tesla can capture just like 3 or 5% of the global production, the numbers start getting big really fast. And this is totally ignoring what they have with the battery business. So yeah, the comment about having Apple's market cap in ten years while seemingly pretty arrogant, might actually seem pretty conservative to Musk who has certainly crunched those numbers with more accuracy than I could. If you think about it capturing just a few percent of the market doesn't seem that audacious considering what they've done so far. It's amazing to see what happens to industries like auto that haven't really changed much in decades or more when someone finally comes along and builds a better mousetrap, or a better slice of cheese?

I wouldn't be surprised to see Tesla earning a lot of revenue from other automakers, who have to pay Tesla for use of the supercharger network.

Other OEMs will offer long-range BEVs. Consumers will shrug it off when they posit "Why buy this when I can get a Tesla for the same price, and drop a roadtrip car completely?". OEMs will struggle as they realize even the efforts of Leaf are completely and totally inadequate for anything but a fast local recharge, and can't even handle volume.

aznt1217 said:

Wondering what people's thoughts are here.

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Depends whether management manages to avoid some upcoming major potential screwups.

Obviously, if there are serious problems with Model 3, Tesla may become very low value.

If the Gigafactory fails to deliver on cost reductions, or fails to secure raw materials supply, Tesla may go bankrupt.

If, when Model 3 comes out, there are only 12 more service centers in North America, Tesla may implode spectacularly due to service complaints. (Tesla needs roughly 60 more Service Centers for any sort of geographic coverage.)

If Tesla does everything RIGHT, then a market cap the size of Apple is quite likely.

neroden said:

Depends whether management manages to avoid some upcoming major potential screwups.

Obviously, if there are serious problems with Model 3, Tesla may become very low value.

If the Gigafactory fails to deliver on cost reductions, or fails to secure raw materials supply, Tesla may go bankrupt.

If, when Model 3 comes out, there are only 12 more service centers in North America, Tesla may implode spectacularly due to service complaints.

If Tesla does everything RIGHT, then a market cap the size of Apple is quite likely.

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Yeah but you have to remember Tesla is Musk's hobby business, a lot of it is just common sense, it's not exactly rocket science!jk

tander said:

I think one thing people don't realize is just how big the car industry actually is. Ford alone sells about a million trucks in North America a year, and if I remember total world wide car sales is like 16 million a year. Even if car production peaked this year and started shrinking, if Tesla can capture just like 3 or 5% of the global production, the numbers start getting big really fast. And this is totally ignoring what they have with the battery business. So yeah, the comment about having Apple's market cap in ten years while seemingly pretty arrogant, might actually seem pretty conservative to Musk who has certainly crunched those numbers with more accuracy than I could. If you think about it capturing just a few percent of the market doesn't seem that audacious considering what they've done so far. It's amazing to see what happens to industries like auto that haven't really changed much in decades or more when someone finally comes along and builds a better mousetrap, or a better slice of cheese?

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Some round numbers:

Global light vehicle sales for 2105 are expected to exceed 88 million. 3-5% would be 2.6-4.4 million (lower if you intended to exclude light trucks.)

Sticking with your F example, their 2014 global sales figure was 6.3 million. Their market cap is just under $59B.

I sure would love to re-read this thread in 3, 5 & 10 years.

No, seriously. I see TSLA well above a market cap of $50Bn before Model 3 hits. After that I guess all bets are off. I've used to think that the potential for future growth depended a lot on what the other big auto companies would do. I've come to change that view no in to rather thinking that Tesla's future lays mostly in their own hands, how they play their cards and if they manage to keep their innovative edge and first mover andvantage. I've seen no sign so far of them slipping in these regards. The X launch will be telling, but it's Model 3 that will be decicive. If everything goes according to plan I have no reason to doubt Elon's own target (coinciding with jhm's Blind Faith Price Target).

$50B (~$385 a share) in 2016 is doable. The following things need to become true.

Build over 55,000 vehicles in 2015.
Plan to build over 95,000 vehicles in 2016.
Ship the Powerpack before the end of August 2015.
Ship the Model X before the end of September 2015.
Get the Gigafactory up and running before the end of March 2016.
Increase the rate of new service centers.
Increase the rate of new Superchargers.
Don't have any major screw-ups.

MostlyStock said:

$50B (~$385 a share) in 2016 is doable. The following things need to become true.

Build over 55,000 vehicles in 2015.
Plan to build over 95,000 vehicles in 2016.
Ship the Powerpack before the end of August 2015.
Ship the Model X before the end of September 2015.
Get the Gigafactory up and running before the end of March 2016.
Increase the rate of new service centers.
Increase the rate of new Superchargers.
Don't have any major screw-ups.

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Great list.

MostlyStock said:

$50B (~$385 a share) in 2016 is doable. The following things need to become true.

Build over 55,000 vehicles in 2015.
Plan to build over 95,000 vehicles in 2016.
Ship the Powerpack before the end of August 2015.
Ship the Model X before the end of September 2015.
Get the Gigafactory up and running before the end of March 2016.
Increase the rate of new service centers.
Increase the rate of new Superchargers.
Don't have any major screw-ups.

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For some perspective, Tesla must reach $43.2 billion of market cap and achieved the following 10 goals by 2022, for Elon to be awarded the option to buy 5.3M shares at $31.17:

1. ☑ Successful completion of the Model X Engineering Prototype (Alpha)
2. ☑ Successful completion of the Model X Vehicle Prototype (Beta)
3. ☐ Completion of the first Model X Production Vehicle
4. ☐ Successful completion of the Gen III Engineering Prototype (Alpha)
5. ☐ Successful completion of the Gen III Vehicle Prototype (Beta)
6. ☐ Completion of the first Gen III Production Vehicle
7. ☐ Gross margin of 30% or more for four consecutive quarters
8. ☐ Aggregate vehicle production of 100,000 vehicles
9. ☐ Aggregate vehicle production of 200,000 vehicles
10. ☐ Aggregate vehicle production of 300,000 vehicles

Source: WSJ

9837264723849 said:

For some perspective, Tesla must reach $43.2 billion of market cap and achieved the following 10 goals by 2022, for Elon to be awarded the option to buy 5.3M shares at $31.17:

1. ☑ Successful completion of the Model X Engineering Prototype (Alpha)
2. ☑ Successful completion of the Model X Vehicle Prototype (Beta)
3. ☐ Completion of the first Model X Production Vehicle
4. ☐ Successful completion of the Gen III Engineering Prototype (Alpha)
5. ☐ Successful completion of the Gen III Vehicle Prototype (Beta)
6. ☐ Completion of the first Gen III Production Vehicle
7. ☐ Gross margin of 30% or more for four consecutive quarters
8. ☐ Aggregate vehicle production of 100,000 vehicles
9. ☐ Aggregate vehicle production of 200,000 vehicles
10. ☐ Aggregate vehicle production of 300,000 vehicles

Source: WSJ

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I don't think 50-300 millions are a motivator for Musk

vitaliy said:

I don't think 50-300 millions are a motivator for Musk

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I don't think he's motivated by money, either, but 5.3 million shares * (265.50 - 31.17) is 1.24 billion. Not exactly pocket change.

Familial Rhino said:

I don't think he's motivated by money, either, but 5.3 million shares * (265.50 - 31.17) is 1.24 billion. Not exactly pocket change.

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I'm sure he would be very motivated to get this. This would increase his control of TSLA and could give him some money to dabble in outher projects later on.