Why Tesla is a Horrific Investment
1, 2, 3, 4, 5, 6, 7, X, Z4, i3, i8. That’s a total of 11 product families from BMW.
And within each family are model variations. For example, the 5 Series comes in a sedan, ActiveHybrid, 5 Touring, 5 Gran Turismo and the M5 sedan — five models within just one product family.
Drill deeper and you’ll find petrol and diesel versions…you get the picture. Oh and the BMW group also make Mini and Rolls Royce.
They sell a lot of cars. As of November last year, BMW has sold 1,902,699 cars worldwide. With December sales, it looks like they were on track to bust through the monumental two million mark.
According to their website, BMW ‘make their products at 30 sites in 14 countries on four continents’.
But they’re not even close to being the world’s biggest car maker.
Ford has similar scale. According to their website, Ford has, ‘about 90 plants worldwide’.
Ford’s 2013 annual report claims 6.33 million ‘worldwide wholesale unit volumes’, with 3.088 million of those in North America alone.
Ford has at least 16 different product families across cars, trucks and SUVs. They also have hybrids, a commercial range and even a few electric cars in the works.
It’s actually bloody hard to get a laser accurate figures on just how many different models these big car companies make.
These companies make a diverse range of cars to cater to almost everyone. Ford, GM, VW, BMW, Mercedes, Hyundai, Honda, Nissan, Toyota and KIA are all the same. They’re the real car companies in the world. They all have the scale and supply chain to get their cars everywhere, anywhere, at cost effective prices.
The biggest of them all
The biggest car maker of them all is Toyota. In 2013, Toyota sold 9.98 million cars worldwide. In second and third place that year were GM with 9.71 million, and VW with 9.7 million.
These are all multi-billion dollar companies, of course.
Ford’s market cap is US$56.8 billion, Toyota’s is US$225 billion, Volkswagen US$108 billion, and BMW US$75 billion.
The Bushko CarCap Value
I was chatting with my mate in Camden last week. We got to talking about the number of cars sold, compared to the market cap value of car companies. My mate reckons you can figure out if a car company is overvalued or not depending on how much market cap each car sold is worth.
Simply divide the market cap by cars sold and you get some interesting figures. We (I) decided we needed to coin a term for our (his) ratio. As such (don’t ask how or why) we call it the Bushko CarCap Value.
- Ford’s Bushko value is $8,973 market cap per car sold.
- Volkswagen is $11,158 market cap per car sold.
- Toyota’s is $22,545 market cap per car sold.
- BMW’s is $37,500 market cap per car sold.
With these figures, the Bushko CarCap Value provides a ranking system.
My mate suggested the current PE ratios of these companies would rank similarly.
It’s pretty close.
- Ford’s P/E is 9.57
- Volkswagen’s P/E is 9.19
- Toyota’s P/E is 12.65
- BMW’s P/E is 11.60
Ford seems pretty good value based on the number of cars sold and their relative value. And of these four, BMW would seem the worst.
But I wouldn’t call any of these companies ‘the worst’. And here’s why.
There’s one car maker that, based on all financial information, is horrific. Price inflation is just the beginning.
I’m talking about possibly the most talked about car maker in the world right now — Tesla.
No one’s exactly sure of Tesla’s sales in 2014. We’ll have to wait a few months for the annual report for that one. But it’s estimated (at best) they sold 30,000 cars in 2014.
Here’s a comparison to help understand how little that is. Toyota on average makes 27,342 cars a day. That’s roughly as many as Tesla make per year.
Tesla is a horrific investment
But to be fair, let’s look at Tesla like we have the other car makers.
Take Tesla’s market cap of US$25.96 billion. Now divide it by the number of cars sold (30,000) and you get…$868,333 market cap per car sold.
It’s another clear sign that Tesla’s stock price is the most over-inflated of all the car makers in the world.
Imagine if the world treated Tesla in the same way they do BMW. Let’s assume that Tesla’s market cap per cars sold was the same as BMW’s ($37,500).
Based on total 2014 sales of approximately 30,000 cars, it would give Tesla a market cap of around $1.125 billion.
That’s about what this car company should be worth. But it’s not. The hype and promise of electric car dominate any conversation of Tesla.
Electric vehicles (EVs) are inevitable. BMW, Ford and VW will soon allocate considerably more money and time to EVs. When they do, they will dominate Tesla. They already have the size and scale to completely run Tesla out of town if they wanted to.
They each have an EV model now. They don’t expect to sell millions of them overnight. It’s to remind the world that if they want to, they can.
I do like Tesla as a company. They’re a necessary part of a competitive market. Already they’ve pushed existing car companies into an EV market they might not have touched for another decade.
That’s a good thing. But as an investment? No. Tesla is stupidly overpriced. If you wanted to look into car companies as an investment, every other car maker in the world would be better value.
Technology Analyst, Revolutionary Tech Investor