Updated: Oct 16, 2020
Tesla Inc. (TSLA) is the most valuable car company in the world by Market Cap, $410 billion. They're currently more valuable than all other US car companies combined. The question, is Tesla becoming so valuable because of speculative movement? It's a valid question, I don't see that many Teslas on the road, and certainly not as many as Ford, Toyota, Honda, or Volkswagen. Yet investors pour their money into Tesla and the stock price can't seem to find its way down from an astronomical value. Well, the answer to the question can be found by looking at Tesla's progression and trajectory.
Tesla has chosen a different route than traditional car manufacturers. Rather than trying to build a better engine and try to compete in an industry dominated by titans, they set out to flip the industry on its head. Tesla began their current campaign and achieved building a battery that could power a car for over 300 miles, which matches the current industry average distance for a car traveling on a single tank of gas. They simultaneously built up AI and impressive internal software, where traditional car companies lacked focus as their engineers built engines, not software.
The momentum has shifted. Tesla may not be producing 100,000 cars a week, and their profits certainly don't justify their current stock price. Yet they have provided a cool, viable, minimum-maintenance alternative to gas-powered cars. And they stand miles ahead of their competition, who even at this moment are trying to further the efficiency of gas-powered engines. Some are simply too large to make a swift change in direction, which will cause them to fall behind further, stretching Tesla's lead. In an industry that will undoubtedly change the entire world, Tesla has the biggest lead and is the only viable competition.
In the long run, 10 years from now do you think there will be more Teslas on the road than Fords? How about 20 years? At some point the world will shift to electric, non fossil fuel transportation, and Tesla could become the world's most recognizable brand. The outlook for the long term is far brighter than the outlook in the short-term, as this company never seems to stray too far from bankruptcy. And while Tesla's current stock price far exceeds the company's reasonable value, it has more potential for growth opportunities than any company today.