Market capitalization (bn USD) of the major car manufacturers

Source: BZM analysis based on S&P Capital IQ data.
Average monthly market cap in bn USD, from 31/12/2017 to 31/12/2020; bi-monthly measurements.

The expectations of change that are affecting the automotive sector and mobility in general, with the gradual spread of electric motors and autonomous driving, are clearly exemplified by Tesla’s capitalization trend. Since its stock market debut in June 2010, the value of the Californian manufacturer of electric vehicles has risen steadily from $3bn in 2012 to $30bn at the end of 2014 and over $70bn in December 2019. But it is in 2020 that the share’s growth was particularly energetic: its capitalization increased almost eightfold in twelve months to just under $700bn at the end of December, i.e. nearly seven times that of the VW Group and more than three times that of Toyota, which together sold more than 18 million cars in 2020, compared with Tesla’s half a million cars. 

The gap remains huge, but is somewhat less pronounced when looking at Enterprise Value (EV), i.e. the total value of companies, including financial debt. According to BZM’s calculations, in December 2020, the ratio of Tesla’s EV, which has practically no net debt, to VW’s and Toyota’s EV, which rely on recourse to borrowings, is 1.7 and 1.6 respectively (the German manufacturer’s and Japanese manufacturer’s EVs are very similar).

The fact that the market expects a lot from Tesla, and not just from car sales, can be seen in the ratio of the December 2020 EV to expected sales and EBITDA in 2021. Tesla’s EV/Sales and EV/EBITDA 2021 are valued at 13.4x and 68.5x, compared to median values for the top 10 most capitalized car manufacturers of 1.2x and 10.9x.

These are provocative stock values and multiples and time will tell whether the company led by Elon Musk will be able to meet the market’s expectations.