Oct 30, 2024

| Financial markets 10 Tesla gained about 125 billion in market capitalization yesterday; Wednesday’s results were better than forecast, and the company’s new business and production projections pleased the market. It’s been more than a year since Tesla failed to beat analysts’ expectations, so the stock has rallied sharply. The increase was steeper than the decline seen after last month’s highly anticipated Robotaxi event; The apparent weakness of that presentation is not quantifiable as a quarterly result, but the market response is somewhat paradoxical, because Tesla is not a publicly traded company. And anything but a publicly traded car company. In fact, it operates in a sector that is battered on the stock exchange but is listed with the parameters of a large technology company. It was one of the so-called magnificent seven, even if its capitalization is 40% lower than Goal, sixth of those famous seven. Tesla trades at a 2024 P/E of over 100x; That is, we would have to wait a century (at the current rate) to recover what we paid for a share in the form of profit. None of the major auto companies trade at a PER approaching it: Toyota is the most expensive, eight times higher. More surprising is the comparison with the other magnificent ones. Nvidia, symbolizing the AI ​​fever, trades at a lower price than Tesla, with a 2024 PER of 90x. The 2025 and 2026 PER (calculated with earnings from those years) is 80 and 60 times for Tesla; of 50 and 345 for Nvidia, according to Bloomberg. When an investor agrees to pay these valuations it is because he is making a long-term bet: at some point in the future Tesla will be able to translate its competitive advantages into market power that will turn it into a money-making machine. Long ago, Tesla had a clear competitive advantage in the electric car industry and was years ahead of the competition. Now it is no longer the only player on the market and there are strong competitors such as the Chinese BYD (that’s why Tesla had to lower prices on some models). It’s true that Musk is several steps ahead of his competitors in design, technology and brand image, in the style of Apple and its iPhone. Now, buying an expensive cell phone is a whim. An expensive car is another story. The industrial argument seems insufficient to explain prices. The same is not true, at least on paper, for its technological leg, namely autonomous driving . That is, the Robotaxi. In the software business, margins are stratospheric as you scale up: Tesla’s self-driving costs $8,000 (and another $100 a month). Once developed, the marginal cost of implementing it in any new vehicle is low. But for now, Musk has repeatedly promised that the Robotaxi will go on sale next year, which never happens . And autonomous driving requires human supervision, at least for now. Another thing is that, as Musk suggested this Wednesday, if Donald Trump wins the election and gives him a place in the administration, he would tailor regulation of autonomous vehicles in his company’s favor, bypassing state regulations: “An approval national is important.” Even tariffs on China can be of little help, eliminating competition. Musk aims to transform Tesla into the largest company in the world but, paradoxically, more than on innovation he seems to rely on something timeless like l adaptation of laws to the needs of the wallet. Share this: