Why is Tesla the most valuable car company in the world?
Tesla’s stock price recently broke $1500 per share, making it the most valuable automaker in the world.
In second place to this throne is Toyota, which sells over 10 million cars in a year, while Tesla sells only 500,000. In fact, at a market cap of over $180 billion, Tesla is now worth more than BMW, Mercedes, Honda and Ferrari combined, which raises the question — why is Tesla so valuable?
1. Disruptive Technology: Tesla level up-ed the electric car game, taking the auto industry by surprise, proving that it is possible to create electric vehicles that can perform just as well as any gas car, and now even better!
2. Created huge demand: Once Tesla proved that EVs are just as performant as gas cars, people started to take them seriously. But more than that, they created cars that people REALLY want to buy. In 2019, the Tesla model 3 was by far the best selling vehicle in the USA for its segment. And it’s easy to see why — Tesla made a really cool futuristic supercar that can drive by itself, is safer than any competitor, is environmentally friendly, and cheaper to operate with great resale value.
In 2019, the Tesla model 3 was by far the best selling vehicle in the USA for its segment.
3. Everything connected to Software and the Internet: The massive touchscreen display in a Tesla controls everything, including Door locks, AC, Seat temperature and even the glove compartment. Since everything is connected to the software, this allows Tesla to release various OTA feature updates. For example, they released an update a few months back, allowing Tesla owners to summon their car from their phone. This is a big advantage Tesla has over other automakers, because software is so scalable and easy to deploy. If, for example, Tesla wants to release an update that makes the air conditioning smarter, they just have to release a software update over the air, while most other car manufacturers have to physically access the car and make expensive upgrades.
4. Vertically Integrated: It is estimated that there are over 5000 individual components that go into making a car. Other automakers source most of these parts from other suppliers, and often even outsource assembly. But Tesla makes more than 80% of these products itself, allowing for a lot of manufacturing flexibility, and the ability to innovate in areas whether the auto industry has stagnated.
5. No dealership model: Tesla sells its cars directly to consumers through their Tesla stores, which are kind of like Apple stores. No dealerships means no commissions, and also means that Tesla keeps the service revenues, which increases their total amount earned per car sold.
6. Solar Industry: If Tesla’s sales continue to grow as they have been, it will prove to be a great catalyst in the shift towards renewable energy. This is great for Tesla, as they have an excellent upsell item: Solar panels for your roof, and batteries to store the sun’s energy. Green, and cheap!
7. Autonomous Taxi Network: Tesla cars already have functioning autopilot systems, that allow the car to drive by itself. Elon Musk has stated that in the future, Tesla plans to create a network of autonomous taxis that can drive around operating like Uber. While Uber and Lyft are waiting for autonomous vehicles to make their businesses profitable, Tesla already has autonomous driving technology, and it’s primary bottleneck is now regulations.
