In the auto industry, Jan. 8, 2021 was an earthquake. Tesla’s valuation eclipsed that of the rest of the world’s automakers combined, reaching a record $844 billion. Although the electric carmaker was responsible for selling less than 1% of the world’s vehicles, in the eyes of investors, at least, it was worth more than an entire industry that has been around since the 1880s. The future of vehicles, the market is saying, will look nothing like its past.
But at present, little about Tesla’s valuation makes sense. A JPMorgan analysis of Tesla’s fundamentals suggests the company should be worth around $130 billion, just 15% of its peak market cap earlier this year. Tesla has only recorded one profitable year (2020) thanks in large part to selling zero-emission credits to other automakers. And while it delivered an impressive 500,000 cars to customers last year, that’s just 5% of what Toyota delivered. In fact, Ford sells nearly as many pickup trucks in Texas as Tesla sells Model 3s on the planet, and the Model 3 is the world’s most popular electric vehicle (EV).