OPINION: For there to be even more upside in Tesla’s shares from current levels, it will actually have to exceed everything that Apple has accomplished.
Fans and shareholders of Tesla are making stronger and louder arguments about the future of their favorite company. In them, they draw analogies to one of the most successful brands and businesses in the history of capitalism. They suggest that automaking may go the way of handset manufacturing and that – for Tesla TSLA, +3.43% – there is a strong resemblance to the Apple AAPL, -1.82% vs. Nokia/Blackberry/Ericsson/Motorola dynamic.
Similarly, let’s imagine that the production and value of automobiles and light trucks will become less about the style or performance that is demanded and instead mostly about the software inside the vehicle. Making all these assumptions, then future margins in “automaking” – for at least one manufacturer – could theoretically start trending up toward the margins generated today by Apple.
Toyota 7203, +0.33% TM, +0.05%, which also started operations in 1938, also has a global market share of 12.0% and generates even better net income margins of approximately 7.0%. In 2035, if EVs represents 95% of all new cars sold, and Tesla has the same 16% market share as Apple does today , it will be producing 22 million cars and light trucks, and generating sales of over $1 trillion.If Tesla were able to generate the same 24% net earnings margin as Apple does today , then it would produce about $250 billion of earnings in 2035.
And in that year, on production of 22 million vehicles at an average selling price of $46,000 and doing 24% net earnings margins, this $250 billion of earnings would work out to about $178 per share.
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