Tesla makes, or at least, made, a cool electric car, but they weren’t the first. The Fisker Karma remains an incredibly cool electric vehicle. But through dogged persistence, grit, and personal investment on the part of its founder Elon Musk, Tesla has been able to remain in production, outlasting other startups.
There is no doubt Tesla showed that consumers will buy electric vehicles if they offer style and cache.
But Tesla has NOT shown how it will make a profit without government assistance. The company still makes more from selling emission credits than its annual earnings, which implies that without such support the firm would operate at a deficit.
No matter. Investors don’t care. Even though Tesla built just 400,000 cars last year out of the almost 100 million built around the world, while Toyota built almost nine million, investors just pushed Tesla’s share price to the point where the company is now valued at $208 billion, eclipsing Toyota’s market cap of $203 billion.
For Tesla reasonably to worth as much as Toyota, the company would have to actually have a profit margin, and then increase production and sales by more than 2000%, which would imply that the company had the capacity to do either of those things.
It can’t, but that doesn’t matter. Investors get to choose how much they are willing to pay for a stock, and when it comes to Tesla, they have one answer. More.
Let’s hope they enjoy the ride; these sorts of things rarely end well.