I’m sure Wallstreet doesn’t expect Tesla to capture 60% of the US EV market at the point where EVs are making up 50% of the US new car market and then beyond as EVs take even more of the market. In 2022, the US car and light truck market was nearly 14 million so that would take 8.4 million Teslas to capture 60%. At $5,000 in profit per car, that would be $42 billion in profit per year just out of the US market. Tesla’s market cap would be way higher if that was a reasonable expectation.
So losing market share from 60% is priced into the stock and expected by basically everyone. You are right though that the question is: how fast does the market share erode (as the market grows quickly) and where does it start to settle in (e.g., does Tesla settle in at 25% of the US new car market; that would be huge because it would be 3.5 million a year of sales just in the US (a massive increase over the about 600,000 Tesla will sell in the US in 2023 and not remotely a number of cars that Tesla can manufacture for the US anytime soon)).
Periodically other manufacturers have had 20-25% of US market share for overall vehicle sales so it’s tough to justify their valuation based on that. A frequent justification of that valuation was that the company could maintain market share. 50+% was always unrealistic but if they can’t capture more than 25% what would make them more valuable than another make making good margins? Toyota for instance.
Tesla has been disconnected from fundamentals forever but “growth” companies start to suffer in the market when the revenue growth and future market share start to decline. Falling margins doesn’t help their case.
I’m sure Wallstreet doesn’t expect Tesla to capture 60% of the US EV market at the point where EVs are making up 50% of the US new car market and then beyond as EVs take even more of the market. In 2022, the US car and light truck market was nearly 14 million so that would take 8.4 million Teslas to capture 60%. At $5,000 in profit per car, that would be $42 billion in profit per year just out of the US market. Tesla’s market cap would be way higher if that was a reasonable expectation.
So losing market share from 60% is priced into the stock and expected by basically everyone. You are right though that the question is: how fast does the market share erode (as the market grows quickly) and where does it start to settle in (e.g., does Tesla settle in at 25% of the US new car market; that would be huge because it would be 3.5 million a year of sales just in the US (a massive increase over the about 600,000 Tesla will sell in the US in 2023 and not remotely a number of cars that Tesla can manufacture for the US anytime soon)).
Periodically other manufacturers have had 20-25% of US market share for overall vehicle sales so it’s tough to justify their valuation based on that. A frequent justification of that valuation was that the company could maintain market share. 50+% was always unrealistic but if they can’t capture more than 25% what would make them more valuable than another make making good margins? Toyota for instance.
Tesla has been disconnected from fundamentals forever but “growth” companies start to suffer in the market when the revenue growth and future market share start to decline. Falling margins doesn’t help their case.