On the one hand, you have Toyota, a Japanese automaker that produces a million cars a year for the world, and on the other, you have You’re here, which is an emerging auto company that recently exceeded Toyota’s market value for the first time.
Toyota’s long-standing decade as a leading automaker in the market was crushed by Tesla, as its stocks rose 5% reach an all-time high of $ 1,135 This year. Toyota’s assessment was $ 202 billion, while Tesla’s market value was around $ 206.5 billion which makes it the most valuable automobile manufacturer in the world.
But what does this mean for Toyota? Will Tesla overtake the company and make it obsolete? Or is Toyota even more valuable to consumers because of its long-term position as a market leader?
In this article, we’ve compared the two companies to find out what’s different between the two. So, without further ado, let’s dive into:
Time is an important factor that determines the success of a business. Toyota has been worth a lot of money for a long time. For the past six years, Toyota has made $ 18.7 billion per year, while Tesla has yet to report an annual profit.
Even though Tesla’s stock value has moved closer to Toyota’s, that doesn’t mean Toyota is down, as it has had a huge store of value in the market for quite a long time.
- Profit margins:
Tesla’s gross profit margins stand at 21% in 2019, while Toyota’s margins were at 17%. Given this information, Tesla has huge growth in store for the future. However, Toyota’s annual revenue was around $ 253 billion as Tesla reported $ 21 billion in revenue.
The maturity of the old company in the industry and greater manufacturing efficiency is unparalleled to that of Tesla. Even though Tesla’s approach to innovation in sustainable energy and transportation contributes to their growth in the near future. He’s still unmatched at Toyota’s constant rate of return, having worked in the industry for decades.
Toyota’s stock prices have fluctuated for decades. However, since the resumption of the financial crisis, the value of the Japanese automaker’s shares has remained stable. On the flip side, Tesla’s stock prices have been quite volatile since its inception. Tesla shares were trading at around $ 400 last year, which has grown by almost 800% since then.
This is a significant increase in stock prices that was achieved by simply selling more cars. Investors warn that the value of stocks is like a huge house of cards that could be about to fold. This means that just as Tesla’s stock price has skyrocketed, there is also a risk of a fall, while Toyota investors regularly make profits because stock prices are less volatile.
- Sales and Revenue:
Tesla’s revenue has grown over the past few years as it has grown significantly. Tesla’s sales and production have grown simultaneously, with Tesla selling around 300,000 cars last year.
Considering that Toyota has made over $ 200 billion a year for two decades and has sold around $ 11 million automobiles Last year. This means that even though Tesla has surpassed the value of Toyota, the Japanese automaker is unfazed because it has been very valuable for many years.
Toyota is an international publicly traded company. Tesla’s 20% is owned by CEO Elon Musk, while the rest is owned by large institutional investors.
This leaves a few stocks for retail investors to buy, resulting in short sellers and FOMO stocks. The large imbalance between supply and demand that drives the price of Tesla shares even higher.
- Market segmentation :
Toyota has successfully grown in market segments having been in the industry for decades. Meanwhile, Tesla is limited to electric vehicles, which is a new concept, making it quite expensive to enter multiple market segments.
Replacing gasoline vehicles and persuading customers to switch to electric vehicles is a challenge for Tesla, which is necessary if the company is to remain valuable in the long run.
Toyota has revolutionized its manufacturing processes, making it sustainable over the long term. Therefore, Toyota is a process innovator.
Whereas Tesla is a technical innovator, who delivers revolutionary leaps that are appreciated in the short term but could be undervalued in the long term.
- Industrial policy:
Toyota’s long-standing decade has been built on leveraging Japan’s centrally organized approach to industrial development in a post-war economy.
While Tesla has taken the benefits of entrepreneurship for the development of the company. However, it is gradually losing its support in the United States for electric vehicles due to the expiration of tax credits.
Toyota has a total debt of around $ 90 billion. Tesla, meanwhile, has about $ 13 billion in debt. This debt is not bad for the company because their cash-to-debt ratios are similar.
However, Toyota has been in the industry for a long time and has therefore built its presence for long term management. Whereas Tesla is a relatively new company that gets too much debt too soon when it should be focusing on long term profits.
- CEO and President:
Tesla has been associated with its CEO Elon Musk and his vision for a sustainable energy company. It is highly likely that Tesla’s value could drop if Elon Musk leaves tomorrow, as his stock price is identified with the CEO’s vision rather than the company’s position.
Considering that Toyota is currently run by Akio Toyoda, the founder’s grandson, and the value of the company is based on its own vision rather than that of a person. Thus, his retirement would not have a significant impact on the value of the company.
The bottom line …
Toyota is a long-standing company that has been extremely valuable for decades and has been financially stable for a long time. Whereas Tesla has seen its value skyrocket in just a year. So even though Tesla has surpassed Toyota’s worth, Toyota’s long-standing decade is incomparable to Tesla’s year of success.