I have a variation on the high functioning EV company Ark Invest case which has a $3400 price target for 2024. The Ark Invest case assumes that Tesla only maintains its 17% world market share of electric vehicles. However, what if Tesla captures market share in China that matches Tesla’s 60+% share in the USA? This would be about 4 times more than the high functioning EV case. $14,000 per share.
If there is China demand at 60+% levels, then this would be 1.2 million cars if China has 2 million electric vehicles in 2020. This would take $11 billion of additional factories and expansion in Tesla in China. This make take 18 months to realize. If there was a series of expansions opening every quarter with another 150,000 to 300,000 cars per year of capacity.
2 million cars in 2021 is not out of the question. If those are at average selling prices of $50,000 each then that would be $100 billion in revenue by 2021. If those are at 25-30% auto margin and 15% profit margin then earnings would be at $15 billion in 2021. If PE was at 40 then this would be a $600 billion valuation in 2021.
Tesla would have to suck up all of the new battery capacity from Panasonic, CATL, LG Chem and any battery factories that Tesla makes.
Production ramping factories in US, China and in Europe and the launch of the Model Y, Semi and then the Cybertruck will continue to drive demand for all capacity that is built.
In 2021 and later, the Tesla story will shift more and more to even better batteries and self-driving.
There is also the power storage, solar roof, insurance and service and software businesses.
If you had acted upon my highly favorable Tesla articles or the bullish Tesla newsletter it would have been very profitable.
Elon having a lot more money to use just means he will change the world faster. His ambitions will only grow.
Other car companies are already weak. GM has over $100 billion in debt and Ford each have $150 billion in debt. Moody’s rates the Ford debt as junk. Elon will be able to buy more factories from failing car companies.
Fiat was buying $2 billion of zero-emission car credits from Tesla to avoid penalties for their polluting fleet. Tesla seems like they can earn 5-10% of revenue from emission credit sales.
The bigger Tesla is the more other car companies will have to make deals and perhaps license Tesla technology. This means Tesla could get per unit cash on sales of cars that they do not build.
Written By Brian Wang, Nextbigfuture.com. Brian owns shares of Tesla