Here’s a question: What if Tesla’s remarkable second quarter stock surge, in utter defiance of all of the electric car maker’s business fundamentals, isn’t just Tesla’s surge at all?
What if the surge, which pushed TSLA shares beyond $1500 and its market capitalization to almost $300 billion is simply Tesla piggy-backing a Chinese EV stock surge?
Its stock price gives Tesla a market capitalization greater than that of every European and American automaker combined and it’s now so high that each wobble in its price sees it gain or lose a BMW in a matter of minutes.
Yet, as Tesla edges closer to joining the S&P 500, at least one venture capital company has pointed out that a near-identical EV bubble is playing out in China.
Before the opening of the market today, Tesla was up 433 percent from its March low point.
And not every analyst believes the boom is real.
In a note to investors, Citi Research analyst Itay Michaeli set a $450 price on Tesla shares, but kept them at a “sell” rating.
“What hasn’t changed, in our view, is the lack of evidence to support the recent narrative in the stock-namely that Tesla is already experiencing seemingly ‘unlimited’ demand that’s decoupled from autos, that traditional & emerging competitors stand little chance, that FSD/AV [fully self-driving technology] is industry leading and that Tesla should be valued vs. large Tech names,” his note read.
“It’s tough to fight the momentum, but it’s even tougher to construct a fundamental risk/reward framework that makes sense here (particularly with COVID-19 risks), even if one is constructive on Tesla the company.”
Out of all the EV makers making share-price leaps, Tesla isn’t even the best performer.
Impressive and all as the stock-price boom has been for Tesla (along with its one-month June leap to the top of China’s New Energy Vehicle Sales), the oft-maligned NIO is up 580 percent during the same period and cost a lot less to get into.
It was near death earlier this year, only to be revived with a $1 billion cash injection via a bundle of companies lead by China’s central government.
Since then Nio, which was founded in 2014, has gone from strength to strength. Its market capitalization sits at $16 billion and it still held five percent of China’s New Energy Vehicle Market in June.
Unlike Tesla, it has made battery swapping work in the real world, with more than 150 swapping stations in China. There are 14 alone on the 2273km highway connecting Beijing to Hong Kong and Shenzhen, and another eight between Beijing and Shanghai.
It also has, for a Chinese car maker, a passion for motorsport. It won the inaugural Formula E electric race championship in 2015 and its EP9 electric sports car set the electric lap record for the Nürburgring’s Nordschleife circuit.
Another one to outboom Tesla is Warren Buffett’s BYD, which has seen its market capitalization leap 446 percent since March.
Buffett’s Berkshire Hathaway bought in to BYD (Build Your Dreams) in 2008 and now owns 24.6 percent of the battery- and car-making giant.
Regularly one of the biggest EV makers in China and a strong profit maker, BYD has more than 220,000 employees and just signed a deal to supply Ford with EV and plug-in hybrid batteries for its Chinese models.
Its Tang EV SUV started selling in Europe this year, too, beginning in the EV stronghold of Norway.
Berkshire Hathaway bought in to BYD at a little over $1 a share and yesterday they were worth more than $9, or HK$70, with $30 billion in market capitalization.
The Chinese EV tech company that makes the EV companies, including Tesla, is Ningbo Tuopu, and it’s up 244 percent from its March numbers.
Ningbo Tuopo supplies both chassis and functional parts for the Chinese-assembled Model 3 and Model Y.
The company that has come from nowhere in the last decade to turn into one of the lynchpins of the world’s EV future is Contemporary Amperex Technology Company Limited (CATL), and it’s up 203 percent since March, too.
CATL makes the batteries for Tesla’s Chinese-built cars, but it also supplies batteries for PSA, Daimler, BMW, Volkswagen, Audi, Hyundai, Honda, Toyota, Volvo, BAIC, SAID and Geely.
It runs a market cap of $44.6 billion and aims to have 50 gWh of battery sales this year, even with the Covid-19 shutdowns and slowdowns.
It hasn’t all been plain sailing in China, though, even in a country that had at least 500 EV makers last year.
Only about 10 percent of its EV startups found funding last year and this year has already seen Byton, Bordrin Motors and Jiangsu Saleen Automotive Technologies driven to the wall.