Elon Musk compares Tesla to Apple

“Comparisons between Tesla Motors and Apple have long been bandied about by the press, Wall Street and some in Silicon Valley. Both focus on cutting-edge technology, place a premium on aesthetics and have done well in the higher end of their respective markets,” Chris Ciaccia reports for TheStreet. “Now, Tesla CEO Elon Musk is getting in on the act.”

“On the fourth-quarter earnings call, Musk noted that the company is ‘going to spend staggering amounts of money on CapEx.’ In the letter to shareholders, Musk noted that those ‘staggering’ capital expenditures would cost around $1.5 billion,” Ciaccia reports. “By justifying the huge increase in capital expenditures, Musk said that the company could potentially become like Apple when it comes to valuation.”

Ciaccia reports, “Musk commented: ‘If you take this year’s revenue, around $6 billion or thereabouts, and if we are able to maintain a 30% growth rate for 10 years, add to your 10% profitability number, and have a 20 P/E, our market cap would basically be the same as Apple’s is today. That’s going to require a bit of — on the order of $700 billion — obviously, getting there will requires some significant CapEx, but I am hopeful that we can do this without any significant dilution to the company, maybe minor dilution but nothing serious.'”

“Tesla is still production-constrained,” Ciaccia writes. “But comparisons to Apple, which recently surpassed $700 billion in market cap and is the most valuable public company in the world, may be a bit premature.”

Read more in the full article here.

MacDailyNews Take: Only $714 billion — or BMW+Toyota+GM+Volkswagen+Tata+Daimler+Ford+$100 billion — to go, Elon!

34 Comments

      1. I have yet to meet a person of means who keeps their car for eight years. And for them, $30k batteries (which will, eight years from now, likely cost less than half that) doesn’t really represent an obstacle if they are so determined at keeping an eight year old car.

        1. Dude, you must only run in rich or poor circles.
          Rich folk are buying new cars regularly, because they can.
          Poor folk are buying a new beater, because the last beater died.

          The middle class buy new cars and hold onto them a long, long time because economically they can’t afford to upgrade to new cars often.

          (An exception is when people buy American made junk that breaks down too often, and you become “forced” to buy again. – I would prefer to buy American made, but I got tired of the constant repairs – too expensive and annoying. Come on GMC, Chrysler, and Ford, get your quality control up to snuff. Fix your reliability problems – could it be the unions dragging you down?)

          I have 2 vehicles in the family one of them is a 2006 Honda Civic that is going strong with over 170,000 miles on it. It is paid off, it still drives like new, gets great mileage, still looks good, has ultra low emissions, and is the most dependable car I have ever owned, only regular maintenance for the 9 years I have owned it. Why wouldn’t I keep this car for 10 years or more?

          By holding on to this car and not buying every 8 years, me and my family can instead: Travel, attend concerts/movies, eat out (at a nice place) once in a while, afford a good amount of Apple kit, etc. All without any debt or credit card payments to hold us back. It is stupid to buy a car every 8 years or less in my opinion. Unless your beater died and you are “forced” to, but then you might be better off staying away from beaters.

          1. I don’t know; you may be right about many in the middle class. I certainly don’t consider myself rich. Most people around me would probably fall into the middle- to upper-middle class (family income between $100-200k). Most of them lease their cars, which means they only have them for 3-5 years. Those that don’t lease usually trade them in for a new one as soon as they pay it off. The main thinking is that the newer cars take advantage of new technology, they are safer, quieter, more comfortable, have better technological features (iPhone integration, for example, which simply didn’t exist eight years ago), etc.

            For an 8-year old Tesla, the used price will likely accommodate the possibility of having to replace batteries. Model S is $70k new, so I wouldn’t expect it to fetch more than $10k after eight years.

          2. Perhaps you don’t know what middle class really means? Apart from the fact that there really isn’t much of a middle class left in America, it is the middle class that buys cars every few years. Or rather, usually leases them and can definitely afford to keep doing so.

            I don’t know much about you, but the fact that you have a 2006 Honda Civic you’re keeping for another 10 years… it’s a guess that not part of the middle class anyhow. (I realize this is casting a wide net, here and it’s just a general statement)

            Besides, many other countries have citizens where have 10 year old cars. Cars older than 10 years old rarely exist in Japan and Germany and even the UK has a higher proportion of newer vehicles. It’s part culture and partly due to the stricter requirements on vehicle maintenance which make buying a new car a financial decision. Older cars cost money to maintain.

            In the US, there are little to no requirements in most states to keep a car in working order. I’m exaggerating, but you can have your bumper duck-taped to your car in some places.

            Compare that to Japan which has a mandatory bi-annual inspection, requiring ALL parts of the car to function, even if it’s an auxilliary system. Britain has MOT and Germans don’t keep old cars around for similar reasons.

            All those reasons are why electric cars with a batteries with 10-year shelf-lives aren’t a problem around the world.

    1. I just don’t understand what the big deal is about Tesla. They haven’t done anything that compelling. They’re selling a car to the tune of $80,000. Incredibly expensive. Yes, they have very good range, but if Nissan or Volkswagen or whoever sold a car for $80,000 they’d be there too. Take the Nissan Leaf for example. It’s $30,000 fairly loaded: an affordable price point.

      If Nissan added a bunch more batteries, made the car bigger and more powerful, etc. the price would have to go up.

      And the Tesla Model S itself. I just am not that impressed with it. It’s a sports car really. It’s not that functional. It’s low to the ground, the utility of the design isn’t super practical because of how low to the ground it is. Try throwing hockey gear or similar in and out of it compared to an SUV. The fact that Tesla is trying to make an SUV speaks to this point.

      I think the Nissan Leaf is the best commercial electric car built yet (it’s certainly the best selling by a landslide), except it just needs more range. It’s very practical with excellent visibility and accessible cargo space. It’s set to get a big range boost within a year or two.

      I’d like something like the Nissan Leaf but with a more sexy design. Tesla is just overpriced stuff for tech geeks.

  1. Maybe by “valued like Apple”, he really means 13x forward earnings. I’m sure someone here could quickly do the math on what Tesla’s current valuation would be at that same multiple. My guess is that Tesla’s current market cap would shrink considerably when judged similarly to Apple…not quite the comparison Elon was trying to make of course.

        1. Chinese market for the iPhone 6+ (which retails for $900 and up) is expected to be larger than the US by the time iPhone 6+ is replaced with the next generation model. These consumers are the same that will be able to afford a Tesla.

          In two years, Chinese market for Tesla will be larger than in America. And it will only continue to grow from there. Most of the developed world is still oblivious about the Chinese economic power and growth.

        2. The number is quite small as a percentage of their population… which happens to be rather large.

          The small production run of Teslas will have NO problem being sold in China. In fact, luxury goods sell really well in Capitalist China because status is more important there than in Socialist USA, which is more of a meritocracy.

      1. Audi A4s are all over the place in Beijing, so there will be a sizeable market for it.

        On the other hand it’s ironic that in China (as in most of the US) the Tesla is a coal-powered car.

        1. Big difference, in China the plants are owned by the government and they can change (to renewables) when they deem it beneficial, with no regards for preserving individual wealth. Here we have to make sure we keep all the rich guys rich, so we ignore real problems on their behalf.

          1. Whether in China or here, it’s not a case of simply flipping a switch.

            Coal-fired power plants are expensive (though much, much cheaper than wind or solar) and have a lifespan of about 50 years (longer with refits).

            There are hundreds is service and hundreds more being built.

            While coal-fired electricity is by-far the largest problem with global CO2 emissions, it’s going to be a very long-haul replacing it (though conversion to gas can be a relatively quick/cheap win).

            1. Very true.

              I would make the point that one of the reasons coal looks cheap is because of the huge externalized costs in environmental damage and health impact are not included in the equation. It’s not a quick change, but in the US we have forces afoot that are resisting the first steps and that does not bode well.

              On a happy note, the cost of renewables is dropping rapidly and new capacity growth from renewables is outpacing fossil fuel driven installations by wide margins. Maybe Moore’s Law will hold for solar panels.

            2. True. It’s not flipping a switch, but it still only making ONE switch as opposed to switching out thousands of vehicles.

              In addition, any technological improvement are more easily applied and mandated onto a single location, rather than forcing all your citizens to be cleaner/greener.

  2. Tesla’s market already has hi-tech, hi-end competitors who are moving into electric and can shoot out a new design and flood the market worldwide within 3 years.

    You think BMW, Mercedes & Lexus are not going to compete w/Tesla, Elon?

    If Elon is going to make his wish come true, he had better innovate like mad, but even that may not be enough. But then again, he may do ‘pump and dump.’

    Elon’s been taking in to much caffeine!

    1. He might be dreaming. But you need to be a big dreamer to push a company forward. If people like Musk and Jobs listened to all the naysayers they wouldn’t have achieved a tenth of what they have actually accomplished.

  3. Musk should keep his mouth shut. The stock is down 7% at the moment.
    Still his cars are the most attractive car made by a US company that I have seen in a long time. Tesla have taken the Apple approach and gone for the high end market. Not sure what their margins are. If they can emulate apple on that then they will be on to something. The factory is just down the road from where I leave and in the bay area you see a lot of these beauties around.

    1. Regarding: “Not sure what their margins are.”
      Musk says that Tesla will turn a profit by 2020. Not very Apple like IMHO.

      What is interesting is that Tesla has released their ownership in their patents to the public. More than likely when Teslas volumes are significant the other auto makers can play catchup very quickly.

  4. Elon talks a great game! I wish him, and electric cars, success. But his numbers are absurdly funny. If you want to compare to Apple then show me a car company with 40% gross margins. Next, show me the ecosystem of products that is going to keep people buying Tesla when other products are available. If electric cars succeed (which even this double Prius owner doubts) then competitors will swamp the market. If electric cars fail, well, then that’s not good for Tesla either. Let’s wish him success and all go buy a Tesla. But it’s OK to laugh when he boasts about how great his market cap is going to be.

    1. Show me all those things in the tech industry 15 years ago. All the things you just said were said about Apple in the late ’90s. All were proven wrong. They will probably be proven wrong again. Most people can’t or won’t learn that those arguments are fallacious.

  5. It would help if Tesla could first produce a profit. I believe they lost over $100m last year.

    They have an appealing vision, but I’ll never be able to afford their product, so it’s ultimately of little interest to me.

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