The problem is that Tesla’s isn’t priced for declining market share. Rising volumes, and falling market share are to be expected in a nascent industry. In the first half of 2021, Tesla sold 14.6% of the EVs sold worldwide compared to 18.8% over the same period in 2020. Tesla’s first-mover is already eroding, and its market share continues to decline. Tesla’s Global Market Share Getting Smaller This affair is more about headlines and fueling speculation than doing any real business. Rental car companies are accustomed to getting discounts for bulk orders, and we see no reason for Hertz to expect to pay list prices on a deal for so many cars.Īt the end of the day, we’re not sure pricing matters because we don't think the Hertz deal gets done. If the deal gets done, we do not expect it to be profitable. Meanwhile, Hertz CEO Mark Fields has made it clear that he is playing the field and working on getting cars from all EV manufacturers on his lot.Įither Tesla is selling cars at a (large or small) discount, the deal terms are wrong, or the deal does not get done. Elon insists that no cars will be sold at a discount. Funding secured.”Įven if the deal does go through, the pricing terms are very unclear. Will the Hertz Deal Result in Any Profits – If It Goes Through?Īfter Elon Musk tweeted on Novemthat “no contract has been signed yet”, the Hertz deal reminds us of another famous tweet: "am considering taking Tesla private at $420. For those that do care about expectations investing, we did the math and Tesla needs to successfully deliver on 155 Hertz-sized deals to meet the sales implied by a $1.2 trillion market cap. Clearly, the feasibility of Tesla meeting the sales expectations embedded in its market cap plays no role in its valuation. This $100 billion market cap jump makes even less sense in the context of Tesla’s sky-high valuation before the announcement. Even Elon Musk questioned the surge in share price, noting that the price movement was “strange” given that Tesla is “very much a production ramp problem, not a demand problem.” Is the Hertz Deal Really Worth $100 Billion+ in Market Cap?Įven if Hertz eventually agrees to buy 100,000 Tesla Model 3s, we do not think it is worth the $100 billion in market cap, or $1 million per vehicle, that we saw investors give Tesla’s market cap after the Hertz deal made headlines. Stellantis was formed as a merger between the two in January 2021. Sources: New Constructs, LLC and company filings* Stellantis sales estimated as Fiat Chrysler and PSA Group’s 2H20 sales and Stellantis’ 1H21 sales. We cannot conceive of a straight-faced argument for the disconnect between Tesla’s valuation and its vehicle sales compared to its competitors.įigure 2: Tesla’s Car Sales Vs. This valuation comes despite Tesla selling less than 1/50 th of the vehicles than the combined total sold by the next 10 largest automakers over the trailing twelve months ended the first half of 2021. Sources: New Constructs, LLC and company filings Tesla’s market cap is now greater than the next 10 largest (ranked by market cap) auto manufacturers combined.įigure 1: Tesla’s Market Cap Vs. This report provides objective perspective on how outrageously high the valuation of Tesla stock is and the clear impracticality of the company meeting the expectations baked into its valuation. Put another way, the $1.2 trillion valuation implies Tesla owns 60%+ of the entire global passenger EV market and becomes more profitable than Apple ( AAPL ) by 2030. Tesla needs 155 Hertz-sized orders to justify the revenue expectations in its stock price. Tesla’s ( NASDAQ: TSLA) market cap surpassed the trillion-dollar mark, driven by a post-earnings rally that got a boost from the announcement of a 100,000-vehicle order from Hertz ( HTZ), which might not even happen.Įven if it does come to pass, the Hertz order is a drop in the bucket of growth expectations baked into Tesla’s valuation. Jetcityimage/iStock Editorial via Getty Images
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