Tesla’s Humongous Market Cap Is Merely Greed & Fantasy

Final Up to date on: fifteenth July 2025, 02:02 am

Look, I’ve obtained some good pals who’re Tesla [NASDAQ:TSLA] shareholders. They’re actually good folks. A few them have had shares within the firm for effectively over a decade. A few others joined the celebration extra not too long ago, however nonetheless years in the past. I held Tesla shares for years, however as I noticed increasingly more warning indicators, I obtained out of the inventory.

Naturally, as an open minded individual, I do know that there’s loads of risk Tesla’s inventory value is far increased in a decade than it’s now. Maybe the corporate finally ends up being disruptive in AI, robots, robotaxis, or different fields. If that’s the case, these pals might be blissful campers in the event that they proceed to consider within the firm and maintain onto the inventory. For that matter, consider all of the Tesla workers working their butts off who will be capable to reap the rewards of their efforts.

However these are all factors which can be distant from the subject of this text, an article I’ve been considering to write down for months. In actual fact, it was most definitely these folks I do know who not directly blocked me from writing this text. I don’t wish to criticize them in any respect — they’re nice, sensible folks — and I don’t wish to harm their emotions. And, in fact, they have to not agree with my viewpoint. Nevertheless, because the Tesla story performs out, it’s very arduous to conclude that anybody owns shares within the firm for causes apart from greed or fantasy.

As we’ve identified for a very long time, Tesla has been exhibiting indicators of weakening client demand. Elon Musk claimed that the corporate would have gross sales development within the midst of that, however then the corporate noticed gross sales decline. (Not signal when your CEO is making incorrect claims and forecasts.) The market cap of the corporate is totally insane in comparison with different automakers. An enormous a part of that for years was that the corporate was alleged to be rising 50% a yr. It was for some time, however now it’s declining, so how can a market cap up to now out of the ballpark make sense?

Tesla’s authentic thesis and mission was easy. Make nice electrical vehicles, and drive down the prices of those electrical vehicles as gross sales quantity goes up. Primary. Easy. Clear. That’s what it did. Tesla pushed the auto trade — within the US at the least — into the electrical automotive period. However with gross sales now dropping, the market cap doesn’t make any sense with out some type of separate miracle breakthrough. Earlier than transferring on to that, although, it’s in all probability vital to emphasise {that a} refreshed Tesla Mannequin Y — one of the best promoting car on the earth — was alleged to revive gross sales development. Manufacturing strains in three factories internationally have been revamped in Q1 to change to manufacturing of the brand new Mannequin Y. In Q2, presumably, we should always have seen the outcomes of that. However gross sales have been nonetheless down yr over yr! Some folks I do know don’t consider within the different sides of Tesla’s enterprise, however nonetheless consider its car gross sales will develop rather a lot. How? Primarily based on what proof? It’s arduous to see how that’s alleged to occur when the Cybertruck has been a complete flop gross sales sensible and the brand new Mannequin Y is already not impressing.

Tesla’s market cap is $993 billion. Ford’s market cap is $47 billion, and GM’s is $51 billion. Ford and GM promote much more vehicles and vehicles than Tesla. Even Toyota’s market cap is simply $274 billion, and BYD’s is $139 billion. For those who suppose the way forward for the auto market is electrical autos, BYD is clearly successful there.

So, why is Tesla’s market cap so freakin’ excessive? Sure, Tesla followers shareholders will speak about robotaxis and robots and AI, and maybe practically limitless future earnings. Nevertheless, I feel it boils down to 2 issues:

1. Greed. Lots of people have made some huge cash on Tesla inventory, they usually need that to proceed ceaselessly. The count on the inventory to soar sooner or later as a result of it soared prior to now, and that will be nice for his or her financial institution accounts. They don’t wish to promote inventory and must pay taxes on it. In different phrases, they wish to be wealthy, and richer and richer. Human nature at play. You seldom discover a huge Tesla fan lately who isn’t a Tesla shareholder. Funds and desires are tied up within the inventory, and as I simply mentioned, the inventory soared prior to now regardless of haters and critics, so logic tells us it ought to soar sooner or later once more within the face of haters and critics. (I do know — that’s not nice logic objectively, however that could be a huge a part of the considering.) Individuals need a magic resolution to make them wealthy. TSLA has been that. So, the considering is that it’s going to proceed to be that. By no means thoughts stagnant or declining gross sales. By no means thoughts failed robotaxi targets. By no means thoughts hovering AI prices. By no means thoughts a totally flopping Cybertruck, the Semi being years delayed, a non-existent Roadster 2.0 practically a decade after it was “revealed.” The inventory has to rise, as a result of it simply has to.
2. Fantasy. As I famous increased up, Tesla’s authentic mission and marketing strategy was easy and clear, and there was an enormous market alternative left there. Now, Tesla’s valuation relies on fantastical desires of robotaxis, humanoid robots, and AI conquering the world. There’s an concept amongst Tesla followers shareholders that Tesla is someway greatest geared up to steer all of those huge rising markets. Previous failures are disregarded, a decade of missed targets are dropped, arguments about far more aggressive Chinese language companies and even huge US tech companies are written off. Possibly they’re proper, however in my eyes, it’s fantasy. It’s a dream of one thing Elon Musk — a gifted marketer — has bought them/us for years. It’s the idea that simply because Elon mentioned it, it should be true — regardless of so many failed tasks and merchandise, and so many shockingly flawed and absurd statements on a big number of issues. Tesla’s tech is nice, superb, however the concept that the corporate’s going to reside as much as its practically $1 trillion market cap appears to be pure fantasy to me. I like Marvel motion pictures, I like Star Wars. I get the enchantment of a dreamy futuristic utopia. However I don’t see Tesla attaining its targets, quarter after quarter and yr after yr. I see numerous hype and funky Hollywood set dream worlds — actually. Tesla has been promoting fantasy, and traders have been consuming it up.

Reportedly, BYD has extra R&D engineers than Tesla has whole workers. If one in every of these two corporations was going to steer us right into a futuristic world, is it extra prone to be Tesla — led by a extremely distracted individual concerned in every kind of various issues and likewise the daddy to at the least 13 children — or is it extra prone to be BYD? Ignoring BYD, you’ve obtained Waymo (Google/Alphabet) rolling out precise industrial robotaxis in increasingly more cities, you’ve obtained Volkswagen Group and different automakers seeing robust EV development, you’ve obtained a number of different Chinese language EV corporations seeing speedy development. Tesla is trying increasingly more like a bloated, complacent firm that’s residing on its legacy and looking for excuses for why it’s not rising.

Anyway, the corporate’s market cap is $993 billion and it’s inventory value is sort of $317, and possibly that’s not going to drop a lot so long as greed and fantasy rule the day. Nevertheless, if the corporate does proceed to see gross sales declines after which runs into monetary issues, effectively, one has to marvel what’s going to occur….

Full disclosure: I personal shares in BYD. I don’t present funding recommendation of any form — severely. Seek the advice of an funding skilled earlier than making any vital funding selections.

Replace/addendum: Beneath one other article, a reader wrote the next equally themed remark:

Tesla Market cap: 1 Friking Trillion {dollars}, ($993 billion at time of writing)

BYD Market cap: 127 billion, about 1/eighth.

TSLA traders, IMHO, are sitting on a bubble and bubbles finally pop. I perceive that Tesla isn’t just a automotive firm, or so they are saying, however is the remainder of the corporate value 7 BYDs?

…and BYD makes their very own batteries in PRODUCTION, not a take a look at facility.

Tesla 20 million vehicles a yr by 2030 now appears a bit far fetched, to place it kindly.

DOJO is MIA and presumed useless.
Cyber Truck is a catastrophe,
The Semi is 5 years delayed.
The humanoid is a protracted shot in a crowded area.
The Photo voltaic Roof/Cousins Bailout didn’t carry out as promised.
Storage makes use of third celebration cells, and not too long ago FinDreams. *

Individuals consider as a result of they wish to consider, even over proof.

* Megapacks use principally CATL cells, and now FinDreams has grow to be a provider. FinDrems is a BYD subsidiary.