Market capitalization is just simple math, multiplying a company's stock price by the number of shares that have been issued. Tesla has issued roughly 3.2 billion shares and is currently trading at around $550, which makes their current market cap about $1.75 trillion dollars.

I don’t understand how the value can be that high compared to all of the other companies, especially China.

On its face it seems utterly nonsensical that Tesla is worth as much as all other auto makers combined, when Tesla only accounts for something like 5% of total US car sales. There are two reasons I can think of why this is currently so:

• Tesla accounts for roughly half of all US electric vehicle sales, and electric vehicle sales are roughly 10% of all US vehicle sales. If electric vehicles largely replace ICE vehicles and if Tesla maintains that share of EV sales, then Tesla will be an extremely valuable company. Investors might be betting on a) electric vehicles and b) Tesla continuing to the win the lion's share of electric vehicle sales.
• Tesla investors are irrational. Personally, my money is on this one. I think long-term Tesla is going to get crushed by cheaper and better-built EVs, probably from China but also possibly from other existing car manufacturers. Sometimes I'm tempted to short Tesla's stock based on this belief, but to quote John Maynard Keynes: "Markets can remain irrational longer than you can remain solvent."

The entire circle represents total value for all car makers. Area taken up is their ratio of the total. It's geographically colour coded.

Tesla makes a lot more profit per car sold than the other OEMs, and part of the stock price assumed continued growth which would mean even more record profits.

In 2023, Tesla made more net profit than Ford and GM combined on their 1.8m vehicles compared to their 10.6m. Tesla also had really strong growth until this year, and extrapolating the growth and the profits they make led to a higher price. (edit: and in 2022 GM/Ford combined were just slightly above Tesla)

Tesla also has their energy division which is growing rapidly and has better margins than the cars (>100% YoY growth in 2024 and potentially > 100% in 2025)

Nowadays though, it's more on the future potential of FSD/Robotics which is a huge wildcard.

People don't see Ford or GM or Toyota massively expanding so they don't get a higher P/E ratio. In actuality, they've got years of suffering ahead of them during the transition.

Then you have companies like Nissan failing being one of the first domino's in the EV transition, and VW getting destroyed in China causing massive layoffs (25%) and a planned 700k vehicle reduction in 2025.

I'm not saying they deserve the price they have today, but it's more than just cars sold to get to a number, it's looking at future potential.

I don't have a chart for you but

2023 net profit

Toyota - 31.82b

VW AG- 17.331B

Tesla - 14.999b

BMW - 12.165B

GM - 10.1b

Ford - 4.347B

BYD - 4.16B

Edit: Just to preempt this, yes Tesla is suffering a lot more this year with the EV price wars, for the first 3 quarters, they're at 4.78b this year, whereas GM for example is at 8.97B. GM doesn't make a lot of profits (if any) on their EVs, but they still have ICE vehicles to fall back on whereas Tesla doesn't.

It takes a lot of guts to omit the /s these days. You can never be quite sure who’s funny and who’s just an idiot.

I saw it

It's more like a variant game of chicken. The longer everyone stays in the higher the value goes, but once people start bailing you better hope you sold enough for it to be worthwhile. The big investors set the game but they're also the most constrained because if they pull out entirely or quickly they can pop the bubble and they may not be able to sell their shares fast enough to get all their money before shares plummet.

Technically that thing has already happened. Or, is still happening I guess.

But Tesla does fail at selling cars. They're an unprofitable company that sells far fewer cars than their bloated valuation justifies.