Cars and Drivers

Tesla Passes Toyota as World's Most Valuable Car Company

Douglas A. McIntyre

Published: June 11, 2020 7:00 am

Toyota Motor Corp. (NYSE: TM), founded in 1937, and in many years the world’s largest car company, is no longer the most valuable as measured by market capitalization. That honor now belongs to Tesla Inc. (NASDAQ: TSLA), founded in 2003. Tesla sells a fraction of the vehicles Toyota does each year.

Toyota’s market cap is $182 billion. Tesla’s is $190 billion. Some accountants would argue that Toyota has treasury shares held by the company that add to its value, but they are not shares outsiders can trade. On a comparable basis, Toyota has lost its crown. Tesla passed the market cap of other large car companies years ago. General Motors Co. (NYSE: GM) has a market cap of $41 billion, and Ford Motor Co. (NYSE: F) has a market cap of $27 billion

From year to year, Toyota alternates the spot as the company that sells the most cars each year with Volkswagen. The race is always close. Last year, VW sold 10.9 million cars while Toyota sold 10.6 million. Tesla is on a path to sell about 500,000 this year.

Toyota sells several brands, including Toyota, Daihatsu, Hino and luxury brand Lexus. Tesla sells only one. Toyota has dozens of models. Tesla has four: Model 3, Model X, Model Y and Model S. Most cars in the world are powered by gasoline, the preferred type of engine among consumers by far. Tesla sells only electric vehicles.

The difference in market cap is that investors believe Tesla’s business model is the wave of the future. They think more and more people will want electric cars, though that case has not been entirely proven. Surveys of drivers show many shy away from electric cars because they are not what they are used to. Some think electric cars are dangerous. Others say electric cars do not have enough charging stations.

Some point out that several of the world’s largest car companies have started to make electric cars of their own. This includes Toyota. Tesla may face a market share block if its larger competition is successful.

At the core of the argument about market cap figures is that, even though Toyota has an annual revenue of $272 billion, it is no longer growing. Tesla has an annual revenue run rate of $24 billion, but it is exploding higher by almost 40% a year.

The argument about which is the more valuable company will be settled if Tesla can hold a growth rate that will get its revenue into the hundreds of billions of dollars.