Tesla Valuation In The Current Financial Turmoil. Electric Cars Price Contest

Tesla Inc. has been cutting the prices of its electric vehicles.

A possible intention could be to wage a price war on its competitors and take a dominant share of the electric car market. I personally think the car market for electric vehicles would remain a niche part of the overall automobile market.

But the niche could become 20 % of the total car market.

The subsidies for electric vehicles of 7 500 USD were cut recently for many automobile producers' car models.

So, consumers globally are about to witness a price competition between electric vehicle manufacturers, it seems.

Tesla, of course, has the first mover advantage and significant technological, manufacturing know-how now.

Car producing corporations like Volkswagen, BMW, Toyota, Daimler Chrysler, Honda, Stellantis, however, have decades of manufacturing experience and very large financial resources at their hand, because as relatively low as their net profit margins might be, they are making billions of USD net profits a year. Each one of them.

So intrinsic valuation in the impending price battle becomes illusive or challenging, at least, to make. I have several times estimated in articles on this blog that Tesla's intrinsic value is 120 billion USD.

This estimation of mine, now also of my firm Wolfteam Ltd., however, was based on the assumptions that electric vehicles would remain a niche part, not more than 10-12% of overall car market revenue and Tesla would not become the dominant player, by far in it. 

The first assumption that electric cars will remain a niche market seems relatively founded still, but now the niche could expand to 20 % of the overall electric vehicles market. As regards the second assumption, Tesla is the leading electric car manufacturer globally currently in an almost oligopoly market, but the market can become almost a monopoly if Tesla manages to sell relatively many more electric cars than its competitors in the next 7 years.

So Wolfteam's estimate of Tesla's intrinsic value is hereby raised to 230 billion USD.

Tesla has acquired formidable cars, vehicles manufacturing know-how. Already. This was one of the main disadvantages in Tesla's strategy execution. Making cars in large quantities proved significantly much more difficult that Elon Musk imagined, as the innovator has stated openly several times. 

But time brings experience. Volkswagen, BMW, Toyota, Daimler Chrysler, Honda, Stellantis, etc. have huge resources and almost centuries of experience in car manufacturing to draw upon.

So, the coming electric cars production and ultimately market share contest would be intriguing to observe in terms of investment analysis and valuation, technological know-how, investments in factories, innovation and driving experience, ultimately.

Disclaimer: The blog post above is not a recommendation to buy or sell securities, derivatives or cryptocurrencies.

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