Daily Management Review

Tesla Becomes The Most Valuable Car Maker Of The World, Beating Toyota


A day prior to eh United States based electric car maker Tesla Inc. posted better-than-expected quarterly results, the company went past Toyota to become the most valuable car maker of the world.
During the most recently ended quarter, Tesla delivered 90,650 vehicles compared to the 74,130 vehicles that was expected by analysts. Year on year, that number was off by just 5 per cent given the current global condition of business and the car market demand because of the novel coronavirus pandemic. And compared to the broader auto industry, that number from Tesla were impressive. According to data reveled on Thursday, there was about a 27 per cent  year on year drop in new car sales in the United States in the same month.
And with an increase of 9 per cent in Tesla shares prior to opening of markets on Thursday pushed the company to become the most valuable car company in the world, with the total market capitalization of $207 billion at Nasdaq. In the way Tesla went past the total market valuation of $203 billion of Toyota – previous highest market cap for any auto maker.
However in terms of the number of vehicles sold, Tesla sold 25 times lesser number of cars in 2019, at 367,500 cars according to the claims of Tesla, compared to the 8,958,423 cars sold worldwide last year by Toyota.
But investors at Wall Street apparently gave greater importance to the future prospects of Tesla.
Currently, the stock value of Tesla is greater than those of General Motors, Chrysler and Ford combined even though these three US based auto majors sell far greater number of cars than Tesla every year.
There are experts who also believe that the stock price of Tesla is set to grow further despite the apparent disconnect between expectations and reality. For example, Chaim Siegel of Elazar Advisors believes that the stocks of the company will rise to $1,545 within the next year.
"If they are able to accelerate profitability in a quarter missing so many production days, imagine a normal quarter levering more fixed costs," he said in a note to clients. "Profitability will be even better."
Tesla’s performance was termed to be a "major home run" by analyst Daniel Ives of Wedbush Securities considering the current pandemic related dismal business environment. "In our opinion, a 90K delivery number in this COVID lockdown environment is a jaw-dropper," Ives said.
"Stringing together profitable quarters increases their chance for inclusion into the S&P 500," Siegel said. "That would force many large funds to have to buy."
Employees of Tesla were urged by CEO Elon Musk earlier this week to work hard so that the company was able to break even in this quarter even in the face of the Covid-19 crisis.
"While our main factory in Fremont was shut down for much of the quarter, we have successfully ramped production back to prior levels," the automaker said in a statement.