Updated: Aug 8, 2020
This linked article from Matthew Debord at Business Insider provides a solid insight on why Tesla is valued so highly by the stock market at the moment. Read on below for my analysis.
Here's why Tesla's stock price is unstoppable:
There is room here for another strand of the rope that is the intertwined sub-businesses under the Tesla brand: not mentioned in Matthew’s article is what may be an undocumented or underexposed theme. This is the viewpoint that Tesla can’t be valued as a car retailer, or as a tech company, or as any normal entity, because really Tesla is a full stack vertically integrated original equipment manufacturer (OEM) and a systems integrator, that also happens to have a retail function.
What do I mean?
I mean that Tesla can’t be valued as a car company because it’s not just a car company. It can’t be valued as a tech company because it’s not a tech company. It can’t be valued as a solar company because it doesn’t only make solar products. It can’t be valued as a wholesaler because it appears to be a retailer. It can’t be valued as a software company, because it doesn’t sell software. It’s not an internet company. It’s not Amazon or Microsoft or Google or Dodo or Yahoo or Verizon or Ford or Enron or PG&E or Instagram or DHL or anyone else.
Tesla does bits and pieces of everything. It is a manufacturer, a wholesaler, a retailer, a marketer, a hype monster, a king brand, an underdog, a leader, a challenger, a pioneer, the new kid on the block, and an old hand.
How do you value a person? How do you put a dollar figure on Elon’s blend of precision and chaos? The art of execution and rebellion?
Tesla started its life as a car company. Then under the direction of Elon Musk, it became much more than a car company: it became an end to end supply chain systems-integrator that has one customer: itself.
Tesla designed everything from the charging port to the battery to the motor to the software that runs the climate control. But it’s bigger than a car company. It developed the Supercharger charging network. The real estate under it. The chargers themselves. The solar panels and the battery storage at the supercharger sites. The navigation software that guides the cars to the charging stations. The internet connection that runs the cars and the server farms that power it.
Then there’s everything that goes into building the batteries. From the battery chemistry to the process line to the battery pack assembly line, to the robot that installs the battery in the car. Ford and GM don’t own BP. Tesla doesn’t own the sun, but Tesla does own and build the solar panels and the charging stations and the real estate under it. Tesla puts that big T logo above all of it; and don’t forget they assemble entire cars.
On top of that, there’s solar panels, HVAC, electric utility, PowerWall, Grid Battery Packs / MegaPacks, software, communications, marketing, retailing, supply chain, logistics, app development, wow.
Even if you subtract Elon Musk from the aura around Tesla, Tesla will survive and grow.
By 2022, Tesla will have a full-stack supply chain integration that involves everything from sunshine to rubber washers to batteries, steering wheels, glass, electronics, and tyres. It’s a full-service stack. If I wanted to build my own car brand, I could buy every single thing I need directly from Tesla: from the battery to the glass to the tyres to the wiper blades to the apps; from the production line robots, to the paint shop, to the retail brochures. I can walk in with $700 million and walk out with a new electric car brand, all from the one company. If you want chicken, you buy KFC not McDonalds.
Tesla may only have five cars and a semi truck, whereas Volkswagen Group has 15 brands and 90 individual cars. Who is winning? Who is really winning?
Tesla built an electric Lotus, then built an entire supply chain around themselves in ten years. It caught up to and then overtook Volkswagen, who’ve been building cars since the 1940s.
Tesla built an electric Lotus, ten years before Lotus built an electric Lotus.
Tesla built the Model S P100D, a four door car that can outrun a two door Porsche.
Tesla then built the Roadster Two, a two door car that can outrun a two door Porsche, a four door Panamera, and a four door Taycan, Cayenne, and Macan. Hell, the Roadster Two beat everything but a hand built muscled-up special edition W16 Bugatti.
Tesla has the marketing ‘sex appeal’ that VW will never have, bearing in mind that VW owns Porsche and Bugatti.
So, can you value Tesla as a car company? No. Simply because it’s not a car company - it’s a complete vertically-integrated supply chain operation that has one customer: itself.
If I threw enough money at Elon Musk, would he use Tesla to build me my own brand of car? Yes. Would it be awesome? Yes.
Would it outshine Tesla? No - because I just became Tesla’s customer, not it’s competitor. My car brand makes Tesla stronger.
Tesla doesn’t need to build Tesla cars.
Tesla exists to build other brands electric cars, and impregnate all other brands with its own batteries and parts.
SpaceX beats the pants off NASA and does it at a quarter of the cost.
Tesla beats the pants off every fossil fuel car on the planet, and Tesla is ten years ahead of any other electric car brand on the planet too.
Oh and don’t forget:
Tesla Supercharger Network
Tesla Retail Network
Tesla Advanced Automation
Tesla Self Driving
Every car part with a Tesla logo on it...
and the factory that builds the robots that build the Gigafactories that builds the cars.
Does the Model 3 have FM radio? Should I care if it does or doesn’t?
I can’t remember the last time I bought an FM radio.
Tell me again, why is Tesla's stock price so wild?
It's wild because you can't value Tesla as a car company, or as a solar company, or as a tech stock, or as an EV battery assembler, or as a lifestyle brand, or as a software company. Why not?
Tesla is not any of those things alone. It's all of those things together.
It's vertically integrated, and it has one customer: itself.
Until next time,
Who is Xavier Zymantas?
Xavier Zymantas started out as the boy genius and piano player who completed 12 years of schooling by age 15, started university at age 15, finished two IT degrees by age 19, worked as a computer programmer for 9 years, then became self employed as a technology consultant. Xavier moved into general consulting and now offers insights, tips, tricks and techniques across a range of business areas.
Xavier's mind works differently, and he often uses techniques from speech, music, travel, business, and life to generate outcomes specific to each business. While each problem may be different, shockingly the solutions are remarkably similar.