Monday, 26 August 2013, will go down as the day that Tesla Motors tipped the valuation scales at $20 billion on the US stock market. The shares topped $173 during intraday trading, a rise of 6.9%, before settling at just over $164, in light of the ongoing problems in Syria and international concerns. The closing valuation for the Tesla motor company was just over $19.9 billion having seen a fivefold increase in the share price during 2013 alone!
While this heady valuation for a company which is not yet consistently profitable, despite having made a quarterly profit earlier this year, seems to be ahead of the times, the company is being swamped by demand for the award-winning Tesla Model S.
How far can Tesla go?
While Tesla has enormous capacity to ramp up production of vehicles such as the award-winning Tesla Model S it is the fact that the company is always looking forward which makes it so exciting. Chief Executive Officer Elon Musk is rumoured to be worth in the region of $8 billion and his significant share in Tesla Motors makes up a large chunk of his personal wealth. You may therefore assume that Elon Musk would take a back seat, but this is certainly not the case!
Quote from ElectricForum.com : "I am lucky enough to have a Tesla dealership with in a 20 min drive of my house, and I received an email from Tesla stating that they have them now in their show rooms."
In the short to medium term the company is looking to introduce an affordable electric vehicle priced around $35,000, break into the European market, build factories overseas and make electric vehicles more popular than they ever have been. These are all very demanding aspirations but the company is certainly making headway with regards to these future plans.
Is Tesla really worth $20 billion?
If you look at the figures for Tesla Motors, a company which has not yet achieved an annual profit, you might automatically assume that a $20 billion valuation was way out of line. At this moment in time there is a significant element of "hope value" attached to both Tesla Motors and Elon Musk but the simple fact is that so far the company has delivered across the board on all promises - which is helping gather momentum.
The electric vehicle industry we see today is in its relative infancy, it is but a fraction of automobile sales worldwide but that is projected to change if electric vehicles become a major component of the worldwide transport industry going forward, perhaps a $20 billion valuation could be justified. On the downside, if Tesla was unable to deliver on short to medium-term promises and forecasts going forward this could see the share price come under pressure because the impregnable nature of the company’s focused strategy would be blown.
Who can match Tesla going forward?
At this moment in time there is no doubt that Tesla is making the headlines in the electric vehicle industry, although there is also no doubt that competition will emerge in the future. A number of the major worldwide automobile manufacturers have yet to put their full force and full finances behind the electric vehicle industry to the extent that Tesla has. As and when they do use their company reputations and finances to the maximum, we then might see a major competitor to Tesla.
At this moment in time Tesla is saying and doing all of the right things, which is why momentum has gathered behind the share price, the company and perhaps more importantly, the Chief Executive Officer Elon Musk.