Tesla Motors Inc Gigafactory May Be Worth Twice The Company’s Value

Tesla Motors Inc Gigafactory May Be Worth Twice The Company’s Value
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The gigafactory of Tesla Motors may be worth $50 billion when completed, according to Trip Chowdhry, an analyst at Global Equities Research.

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The estimated value of the gigafactory was twice the current value of the electric manufacturer’s market capitalization at approximately $24 billion.

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Chowdhry explained that Tesla’s gigafactory is a new industry creation activity, and its scenario happened many times in the past. The analysts identified several companies that experienced the same situation before such as Microsoft Corporation, and Amazon.com, which exceeded the market cap of well established companies.

Tesla’s similarities with Microsoft, Amazon.com

The analysts noted that during the early 1990’s there was a huge debate as to how a newly minted company like Microsoft Corporation can be more valuable than General Motors Company. The software giant eventually surpassed the market cap of GM. Today, nobody is questioning it.

During the late 1990s, people doubted Amazon.com’s business strategy, but the e-commerce giant succeeded and its market cap is now bigger than Borders and Barnes & Noble.

International Business Machines and Oracle Corporation also questioned Amazon.com’s ability in enterprise computing in the latter part of 2000. Chowdhry noted that the e-commerce giant is currently setting the trend in enterprise computing through Amazon Web Services (AWS), both IBM and Oracle are playing catch up.

Tesla is creating a new industry with gigafactory

According to Chowdhry, Tesla’s gigafactory could experience the same success just like Amazon.com, Microsoft and Priceline Group.

He believed that the gigafactory will valued at $50 billion when completed and its impact will have a huge impact, but many won’t see it in 2015.

Chowdhry emphasized that Tesla Motors has similarities with Microsoft Corporation and Amazon.com that created the software industry and e-commerce industry, respectively.

The analyst said the ingredients in creating a completely new industry are perfectly in place with the gigafactory. The electric car manufacturer is creating the energy storage industry with the gigafactory.

Tesla expected to complete gigafactory by 2020

Tesla Motors is expected to complete the construction of its gigafactory by 2020. The company is expected to spend around $5 billion to build it. For the foundation alone, the company is expected to spend $16 million.

The electric car manufacturer aims to produce around 500,000 battery packs every year once the gigafactory become operational

Chowdhry maintained his Overweight rating for the shares of Tesla Motors with a $385 price target. The stock closed $191.93 per share on Tuesday.

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  1. @EdwinInFlorida – as for stationary storage…you are right again…you really aren’t well versed in that. Charge/discharge rates are not an issue or advantage at all. Do you think you are suddenly going to have a “really, really sunny day” with a huge inrush of current from your solar panels? No…not going to happen. As for discharge…unless you have an aluminum smelter in your house, you will seldom draw more than 10,000 watts at a time (and normally considerably less….I average 1,400 watts)…and that’s when your air conditioner is running. A single car battery can put out that much…and if you have a string of 20 or so…they can do it for quite some time.

    Maybe you don’t have the space for a refrigerator in your house…but I do…and that’s about the size we are talking about for Lead-Acid storage systems As for cost, and article I read today said Li_ion is still about 6-10 x the cost of Lead-Acid. Li-Ion should come down some…..but it has a long way to go before it’s competitive.

  2. @EdwinInFlorida – you are correct…there are a lot of factors that will determine the future value of the GigaFactory and anyone who claims to know what it is worth is just speculating. The article speculated it will be worth $50 billion…and I think that is wrong.

    I’d note that Elon Musk has a tendency to be overly optimistic in his projections. He sated in 2006 that the Roadster would cost something like $86K and the follow up sedan (the Model S) would cost half as much. To date, the average sale price of the Model S is right around $100,000. Not to say it isn’t nice….it just isn’t as cheap as Musk projected.

    The Model X was originally supposed to debut in December of 2013. That slipped to 2014….and the 4Q 2015…and now I see 2016. Again…overly optimistic.

    Tesla has never made a profit according to GAAP standards…and while they claim to have high development costs….so do the profitable companies.

    You are free to believe in the future according to Musk…but I don’t. I see him more in a Miracle on 34th Street perspective. He isn’t Santa Claus….he’s just a nice old man with whiskers.

  3. Let me break this down for you so that it will be easier for you to understand, inspite of you claiming to be a “professional engineer in sixteen states”.

    You’re not a financial analyst. The potential valuation of Musk’s Gigafactory is not based on what it cost to build or how much was invested in the infrastructure. It is base on a series of formulas that take into account many factors from projected sales, and profits, to the end result on how it impacts the economy. There are literally hundreds of variables to come up with that figure.

    Keep in mind that the analysts do make mistakes too, but I would trust their opinion on this particular topic, than I would an engineer, no offense or disrespect meant.

    Now as far as stationary energy storage I will admit that I am not very well versed at all, but from what little I do know, using a storage device such as lithium ion has not only the advantage of superior energy density, but the capability of having faster charging, and discharge rates if the need arose for some reason.

    Inspite of the fact that lead acid seems cheaper, lithium ion’s high energy density means that you don’t need a huge amount of cells to store the equivalent of what the lead acid would have.

    Maybe in a factory or other production facility, floor space would not be an issue for the large amount of lead acid required but it would be in a residence, where space is at a premium.

    Lastly, the cost of lithium ion is dropping two fold. First in the scale of economies with huge production, and improved manufacturing processes as well as the recovery of R&D costs. Second is in the improvement of energy and power density which means less and less masses of cells will be required to store the same amount of energy as previous iterations.

    What was true a few years back, is not true today, and much less tomorrow. You should know that as an engineer of all people.

    I’m signing out of this debate. I have a life elsewhere.

    Have a good one!

  4. @EdwardInFlorida – if I build a $1 million dollar grocery store and then I build a $10 million grocery store that is 10x the size, is the bigger one worth 100x as much. I’d argue it isn’t….unless it offers some innovations that the smaller one doesn’t. There are already battery factories, the GigaFactory is just a really big one. As such, it should have some additional efficiencies….but not enough to make it worth $50 billion.

    As for the stationary market, I am an electrical engineer by training with Professional Engineer registration in 16 states and as part of my job I engineer stationary power back-up systems for telecommunications facilities. We use Lead-Acid batteries, diesel generators and hydrogen fuel cells. I’d note, the fuel cells only make sense with government grants.

    For stationary applications the advantages of Li-Ion batteries – weight and energy density – aren’t the most important factors, cost is, and Li-Ion is expensive. When you are moving…like in a car or a plane (Boeing 787) light weight and high energy density are great….but our batteries / generators / fuel cells all go on concrete floors or pads. Lifetime price is the most important factor and Li-Ion is not competitive.

    I’d note, that this holds true for small telecom sites as well – like cell phone towers – which are served by 200 amp 120/240v service – just like most private homes in the US.

  5. the value has very little to do with the contribution of the Gigafacotry to the economy of the country, it has much more to do with the contribution to the companies bottom line.

  6. @gregorysuhr:disqus I guess you haven’t taken business courses related to accounting, economics, marketing, etc. The valuation of the Gigafactory is not dependent upon the cost of building the physical manufacturing facility, but the overall contribution to the economy of the country. You’re wrong on both counts as to what you said about doing “something new”, and that it’s just because they are going to do something that is already being done, “bigger”. Yes they are going to manufacture more cells than the current combined global production. While the majority of the cells will be used in Tesla’s cars, the other huge utilization will be in the energy storage sector which is said to be potentially even larger than the electric car market. Musk’s company is slated to dominate that sector, and hence the projected valuation of the Gigafactory.

  7. I don’t see it. Amazon did something new with internet sales. Microsoft lead/road the personal computer wave. The GigaFactory….is just a really big factory building batteries…which already are built by the millions.

    Will it be successful, perhaps. Will it bring cots down, to some extent I’m certain it will. Will it be wort 10x what it costs to build….I doubt it. It’s not a quantum leap in technology or business practices, it’s just doing an existing thing…only bigger.

  8. The Gigafactory will be completed much sooner than 2020. It’s planned to start production before 2017 when the Model 3 releases and reaches full production in 2020.

  9. I own an MS P85 and absolutely love it. I have 6500 miles on it and still feel like a kid on a fun ride every time I drive it. I have not had even 1 problem with the car.

    The Giga factory will not only sell car batteries, it will sell batteries to power plants, commercial buildings, and consumers, to store their wind and solar power. I can’t wait to buy a home battery!

    That is why Tesla is not even close to their ultimate market cap.

    As to Toyota or GM, none of them are building a battery plant, and all of the other world supply is being used up with smart phones etc. Maybe Tesla will sell them batteries?

  10. “Tesla Motors is expected to complete the construction of its gigafactory by 2020. The company is expected to spend around $5 billion to build it. For the foundation alone, the company is expected to spend $16 million.”
    I don’t know where you get that!

    JB Straubel, CTO of Tesla Motors remarked that the Gigafactory battery plant is ahead of schedule.

    “We’re a bit ahead of schedule in the Gigafactory than what we previously communicated. We felt it was important to go as fast as we possibly could and start some production operations in 2016,” says Straubel.

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