Since BMW is soon getting into EV/PHEV sales with the "i" sub-brand (BMW i3, BMW i8 and possibly more models in the future), it is maybe helpful to compare BMW and TSLA sales and valuation numbers:
Sales of the entire BMW group (including Mini, Rolls Royce etc.) were close to 2 million units per year:
BMW said today its global sales for July  set a company record with 152,349 vehicles delivered to its worldwide network of dealers, up 12.3 percent over the same month last year.
The German automaker also said that year-to-date sales reached an all-time high with 1,106,876 units sold over the first seven months, 6.8 percent higher than last year.
In 2013, BMW is on track to sell over 2 million units for the first time if sales keep up. As for valuation, The WSJ made a good comparison with TSLA. BWM would be worth over 700 billion USD if it enjoyed the same multiple(s) as TSLA:
$725,230,041,600: If BMW were valued like Tesla, it would be worth that much. And yes, that is 3/4 of the way to $1 trillion.http://on.wsj.com/15ScHls
One of course needs to keep in mind that TSLA (in an optimistic scenario) is in full growth mode while BMW has a low P/E around 10 as a more "mature" company.
(On a side note, wouldn't it make sense to assign BMW a higher P/E thanks to its new EV "i" division in case one is so bullish for EVs ?)
Even so, BMW is just worth over twice the current market cap of TSLA in reality. In addition, BMW also pays out a dividend while TSLA doesn't (and probably won't for a very long time).
Does this TSLA valuation make sense - especially now that BMW is introducing is own "i" sub-brand of EVs and entering Teslaland so to speak with a P/E of just 10?
(The "i" will not be a single BMW vehicle, BMW is just getting started with the first model, the i3. "i" will become a sub-brand - with an i1 and and i5 model rumored for 2015-2016 - like "Prius" already is for TM. Prius of course also started as a single vehicle at Toyota and now collects a portfolio of cars, acting as TM's green/hybrid sub-brand.)
In my opinion, it will be hard for TSLA to even get past 200-250k/yoy vehicles sold. In my estimates, these aggregate numbers include:
- Model S and Model X combined (and maybe a new sports car to replace the discontinued Tesla Roadster): 75-100k/year
- Model Car III (estimated for 2017): 100-150k/year *
TSLA optimists will probably argue this figure is much too low, especially for the Gen III car: "Tesla has a first mover advantage [in EVs and EV infrastructure]." They also like to point out a production capacity of up to 500k cars/year, achieved at Tesla's current California factory under its former ownership (GM/Toyota JV, NUMMI).
My reply: First of all, Tesla is not the EV market leader in sales and doesn't have a first mover advantage in the mass-market segment - only at the high-end of the EV car segment (and maybe soon in highend EV SUVs with the Model X, but again, this is not the mass car market).
The unit market leader in EVs is Nissan-Renault. By July 2013, it sold 100k EVs in total. Its most popular model is the Nissan LEAF, selling over 70k units so far. TSLA will probably not reach this number before 2015 while Renault-Nissan keeps expanding its EV car portfolio globally.
The average selling price of a new car is just 28k USD in North America.
Let's define the mass market for EVs at the 25-40k USD price range.
In my opinion, the likely market leaders in the mass-market EV/PHEV segment will be the GM Volt, the (upcoming) BMW i3 and the Nissan Leaf. Plus Toyota will press on with PHEV Prius and Aqua models.
Most importantly, Tesla will not even have a car for sale in this lower segment for another 4 years, maybe even 5 years globally.
The crucial two questions for TSLA's future valuation:
- With economies of scale etc. kicking in who will the be market leader in volume sales in 2017 and beyond? I would assume it will (still) be the Nissan Leaf or a similar vehicle available on the market today, maybe a Prius EV variant.
- Will EV margins shrink or grow in that market segment (25-40k USD range)? Obviously TSLA enjoys high gross margins at the moment - so does Porsche. High gross margins can be expected at the top-end slice of almost any market, but as soon as TSLA enters the mass market its current margins will likely shrink below Porsche's.
Summary: Is Mr. Market drunk with euphoria for the new entrant? I do think so at TSLA share prices over 150 USD as of today. Or as another commenter on SA named "WallStreetDebunker" aptly put it:
Tesla speculators seem to have a Warren Buffett type investment horizon with a twist: It will take 10 or more years for Tesla to earn its way into its current stock price assuming everything goes right. Even with everything going right, Tesla shareholders will likely suffer through one or two severe bear markets in the next decade (>50% declines for cyclical automakers) on the way to earning its way into the current stock price.
( Source: seekingalpha.com/user/1056791/comments )
In case the Gen III from TSLA becomes reality in 201x with all of Tesla's promised features (at or below 35k USD, 200 miles of range, attractive or at least healthy gross margins) one thing is for certain in my opinion:
If it indeed becomes possible to build such a car (and battery) for TSLA then every other automaker will do the same within 2-3 years, shrinking TSLA's margins and increasing EV competition further.
That was the ultimate goal of CEO Musk all along (move personal transportation and the auto industry away from fossil fuels to EVs quickly)- but the financial result of this outcome may not please TSLA shareholders so much.
* Of course, no one has even seen the Gen III car outside of TSLA. According to Tesla's plans, it should cost just 35k USD (before rebates) and have a (pure EV) range of around 200 miles.