Summary:
- Tesla, Inc. is irrationally valued, trading at a premium compared to a basket of companies excelling in EVs, energy storage, Full Self-Driving, and robotics.
- This basket includes leaders beating or matching Tesla in everything.
- The basket further includes large businesses TSLA isn’t even in.
Sven Piper
Everyone knows Tesla, Inc. (NASDAQ:TSLA) is the most fantastic thing on earth. It’s a leader in EVs. In driverless technology. In robotics. And in energy storage. Or so the thesis goes.
So, I thought perhaps one could do a simple exercise. What if we tried to find some of the best companies in those areas, and see just how extraordinary Tesla is, and much it would cost to have all of those capabilities in one Portfolio.
So here we go.
First, EVs
For EVs, we’re going to use the only possible alternative. BYD Company Limited (OTCPK:BYDDY). Now, BYD is on track to sell 4 million NEVs (New Energy Vehicles) in 2024. These include both EVs, and EREVs, which are basically EVs but with a smaller battery, a full EV powertrain, and an on-board generator for when the battery runs out.
4 million vehicles, of course, represents a significant 32% growth from 2023, when BYD sold only 3.02 million such vehicles. Tesla, on its side, is struggling to match its 1.8 million deliveries from 2023 to 2024. So, this looks like a good replacement. In other words, not only is BYD much larger than Tesla, but it’s also growing much faster (and, I should add, going upmarket as well).
Moreover, nearly all of BYD’s sales are in China. The large international expansion is still to come, and for now, represents under 10% of its deliveries.
Buying BYD comes with another bonus, too. We get a large EV battery division and a large energy storage division on top. BYD controls 17% of the worldwide market for EV batteries, against Tesla’s 0%. BYD also has a large energy storage segment, for which it shipped 22 GWh in 2023.
For all of the above, BYD trades at a market capitalization of $108.7 billion and trades at a 16x forward Price/Earnings.
Then, Energy Storage
We already have a bit of energy storage with BYD. But we want a lot. So, we will throw in the battery mega-monster, Contemporary Amperex Technology Co., Limited, commonly called just CATL.
CATL shipped 69 GWh of batteries for energy storage in 2023. So, nothing comes close, this is the worldwide leader. For reference, Tesla shipped 14.7GWh of energy storage systems in 2023, and expects to double that, so to around 30 GWh, in 2024. That’s a far cry from CATL even in 2023, but of course, with Tesla, we’re talking systems, whereas with CATL we’re talking about the most important component of those, batteries. CATL also ships systems, but we don’t have precise numbers on those.
Of course, CATL also ships a massive amount of EV batteries, is the worldwide leader by far and holds around 36% of the worldwide market share.
CATL, as a whole, carries a market cap of $161.5 billion, and trades for 20.3x forward earnings.
Full Self-Driving
Tesla’s full self-driving, or FSD, isn’t ready for driverless autonomy. A company which is already deploying fully driverless cars is Baidu, Inc. (BIDU). BIDU is better known for its search engine (leader in China) and also has a cloud segment.
However, we’re including it here anyway, just for the driverless tech. Mind you, BIDU has a lot of cash in its balance sheet, so although it carries a $31 billion market cap, it trades for just $5 billion in EV (Enterprise Value, rounded up from $3.6 billion).
Here’s a simple calculation on how this value is arrived at (the source for balance sheet values is the latest Baidu report):
- Market capitalization = $31bn.
- Net cash = $11bn ($6bn cash + $1.6bn restricted cash + short-term investments $14.7bn – short-term loans $1.7bn – converts current portion $0.4bn – notes current portion $1.1bn – operating leases $0.4bn – long-term loans $2.0bn – notes payable $3.8bn – convertible senior -$1.2bn – operating leases -$0.7bn).
- Non-operating assets = $16.4bn (long-term investments $6.4bn + long-term deposits and investments HTM $10.0bn).
- EV = $3.6bn (market cap $31bn – net cash $11bn – non-operating assets 16.4bn).
Hence, the driverless tech will be nearly free, and that’s even ignoring the other two large businesses.
Indeed, just to add some tech following the same approach as Tesla, let’s also throw in Mobileye Global Inc. (MBLY). Mobileye has an ongoing business selling driver assistance systems, and also has more advanced tech (than what it sells) in its labs. Mobileye trades at $14.1 billion in market cap, and 42x forward earnings.
Robotics
Where will I find robotics to challenge Tesla? Ok, I know. Let’s throw in Hyundai Motor Company (OTCPK:HYMTF), which owns Boston Dynamics, the actual pioneer in modern humanoid robots.
Hyundai, incidentally, although we’re only picking it for the robots, also sells cars, both ICEs and EVs. It sold 4.2 million cars in 2023, and it plans to be more or less stable, like Tesla, in 2024.
The whole of Hyundai trades for $37 billion, and trades at a forward Price/Earnings under 3x.
So, We Are Done
Recapitulating:
- BYD, a leader ahead of Tesla in EVs, is larger and growing faster, with $108.7 billion.
- CATL, a leader ahead of Tesla in energy storage, is larger and owns the most important technology (the batteries themselves), $161.5 billion.
- BIDU and MBLY are leaders in driverless tech, besides coming with a host of other businesses, $5 billion + $14.1 billion.
- Hyundai, a leader in robotics with a car business 2x larger in deliveries than Tesla, $37 billion
Summing it up, this pack of leaders would cost us … $327.3 billion. Of note, arguably all of these entities match or beat Tesla in all of Tesla’s segments. Often by far. Often growing faster. And often dominating businesses Tesla isn’t even present in (like batteries for EVs, search in China). Etc, etc.
Yet, all of them put together cost just $327.3 billion, which compares to Tesla’s market cap of, as I write this, $1,335 billion. 4.1x more.
Conclusion
Tesla is irrationally priced, and trades at a 4.1x premium to a basket of companies that are either ahead of it, or match it, in every single segment of relevance, present (EVs, energy storage) and future (FSD, robotics). And that’s before counting all the other massive businesses these companies in the basket have, exceeding what Tesla does and promises will do.
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Analyst’s Disclosure: I/we have a beneficial short position in the shares of TSLA either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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