could be bigger than both
combined, by sales, in just five years – if everything plays out the way Morgan Stanley analyst Adam Jonas is thinking.
It’s a provocative idea for investors to ponder – and a bit of a shocking one.
Two century-old auto makers with hundreds of billions in sales eclipsed by a start-up founded less than 20 years ago does not seem plausible. It really should not be. The market has already declared a victory in the electric vehicle transition. Still, the math behind that kind of market share shift and growth is something to behold.
“Most auto investors we speak with still struggle with the idea that Tesla could ever be bigger than either GM or Ford,” Jonas wrote in a report published Thursday.
But Jonas does not find the idea hard to grasp, at all. In fact, he believes Tesla sales will be larger that GM plus Ford by 2027.
There is one catch with his thought experiment. Tesla will be bigger than both on a “run-rate” basis – essentially annualizing whatever data is most recent. Tesla, for instance, sold roughly 309,000 cars in the fourth quarter of 2021. Using Jonas’ math, the EV pioneer is producing cars at a run-rate of roughly 1.24 million units.
Tesla’s fourth-quarter sales came in at roughly $ 25 billion, putting its run-rate sales at $ 100 billion or so. GM’s amounted to $ 33.5 billion, or an annual run rate of about $ 134 billion. And Ford’s came in at $ 37.7 billion, or an annual run rate of about $ 151 billion.
For January, Jonas calculates Tesla had 4% of the dollar value of US sales and he estimates the company’s share of unit sales was about 3.5%. Tesla’s vehicles are more expensive than the average vehicle.
By the end of 2026, Jonas figures Tesla will have 10% unit share of the US market. His estimates for GM and Ford unit share are roughly 14% and 11%, respectively. Tesla will still have higher average selling prices by then.
Put it all together and Jonas projects run rate sales for Tesla at the end of 2026 at about $ 300 billion. GM and Ford should still be stuck around $ 150 billion each.
For Jonas’ clients, he’d better be right. Tesla is already priced like it’s going to win market share. Its sales might still trail GM and Ford, the Tesla dwarfs every other auto maker on one key metric: market capitalization.
Tesla’s market cap is roughly $ 900 billion, which is roughly six times the combined market value of GM and Ford.
With a disparity like that, Tesla will need to keep growing in 2027 and beyond. Jonas definitely sees that happening. He has Tesla “share of wallet,” which is essentially unit share times average pricing, to 23% of the US market by the end of the decade.
On Friday, Tesla stock rose 3.6% closing at $ 923.32. The
rose 0.5%. The
Dow Jones Industrial Average
Right now, Wall Street is seriously wondering what Jonas could be thinking. If he is right, his clients will not only be happy. They’ll be having the last laugh.
Write to Al Root at email@example.com