Is Tesla worth more than Apple and Saudi Aramco combined?


Tesla Inc reported third-quarter earnings on Wednesday, showing signs of slowing growth. However, Tesla CEO Elon Musk once again made a wild statement on the conference call after the earnings report, saying that Tesla's market value may exceed that of Apple and Saudi Aramco in the future.


  After reaching a market value of $1 trillion last year, Tesla’s stock price has fallen by more than 36% this year, and its total market value has fallen to $670 billion. Shares of Tesla tumbled more than 6 percent after reporting weaker-than-expected earnings on Wednesday. Apple and Saudi Aramco are worth $2.3 trillion and $2.1 trillion, respectively.


image source: sina technology

  The financial report shows that Tesla’s revenue in the third quarter was $21.45 billion, of which the automotive business revenue reached $18.69 billion, a year-on-year increase of 55%. Although revenue hit another record high, it still fell short of analysts' expectations; and Musk also predicted that this year's sales target of a 50% increase in deliveries from last year may not be achieved.


  Still, Musk has played down market concerns about weak demand for cars as much as possible. The main reason for his optimism about Tesla's prospects is that the development of electric vehicles has become the general trend of the global auto industry.


  The data shows that Tesla's deliveries have increased by more than 62 times compared to the same period a decade ago. "In the next few years, Tesla vehicle deliveries are expected to achieve an average annual growth rate of 50%." Tesla maintained its confidence in the growth of the electric vehicle market after the earnings report.

Tesla has made it a mission to produce affordable electric vehicles since its inception, and cost reduction has become the company's top priority in Tesla's development. But it has also become more difficult for Tesla to reduce production costs as global supply chain constraints and inflation-driven raw material rises intensify. The average price of Tesla's U.S. Model 3 has risen 24% since January last year.


  Tesla delivered 343,000 electric vehicles in the third quarter, but logistical challenges have resulted in deliveries rarely falling short of production. Tesla acknowledged that as production continues to grow, it becomes increasingly challenging to ensure the ability to transport vehicles at a reasonable cost during peak logistics periods.


  Supply chain and logistics challenges also impacted Tesla's gross margin. Tesla's third-quarter gross margin for vehicles was 27.9%, down from 30.5% a year earlier.


  Software sales may be the most effective way to boost Tesla's gross margins. According to a McKinsey report, the automotive software market will grow at an annual rate of 9% through 2030, faster than the entire automotive industry. McKinsey analysts predict that sales of automotive software could reach $50 billion by 2030.


  On the Tesla AI Day held on September 30 this year, Musk said that Tesla is likely to launch the FSD Beta version of the full self-driving function globally by the end of this year. As of the end of the third quarter of this year, the number of North American users of the FSD Beta version has reached 160,000, compared with only 2,000 users last year.


  In September of this year, Tesla has quietly raised the price of FSD software by 25% to $15,000, but the subscription fee has not been raised, still $199 per month. Tesla hopes to make FSD mainstream for autonomous driving in the future.

At the same time, Tesla is also cutting operating costs at its stores, although this may have some impact on Tesla's ability to serve. Tesla owners have complained that Tesla's service hasn't kept pace with the rise in electric vehicle production and deliveries. The number of Tesla's stores and service centers grew by just 6% in the third quarter of this year.


  Tesla's rapid growth over the past decade has amazed the market, thanks to a stable and positive global economy. However, in the past two years, the global economy has faced greater uncertainties. With rising energy prices in Europe and a slowdown in the Chinese market, Wall Street has become increasingly concerned about Tesla's ability to cope with the overall weakening trend in the auto industry. Especially in the case of rising electric vehicle prices, whether sales can still remain strong.


  On the other hand, China's electric vehicle manufacturers are also on the rise, and analysts believe that domestic competitors including BYD, NIO, and Xiaopeng have already threatened Tesla's market position. Benefiting from the promotion of Tesla, Chinese consumers have a higher acceptance of electric vehicles, while domestic auto manufacturers may have more advantages in terms of services, and in recent years, with the improvement of the domestic auto supply chain, domestic brands have also It can provide higher quality and more cost-effective electric vehicles.


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