Tesla market cap is US$ 1.3 Trillion in comparison to regular car manufacturer it’s ridiculously high
The world leader Toyota has like market cap of 45 billions and other big manufacturer reach similar value. The only exception being the other leading brand on electric car “BYD” with a market cap of 750 billions.
However, even assuming that Tesla stays the leader of electric car, how would it make it more valuable that let’s say Toyota. Especially now that “many of the person who can invest the price of an appartment in a fancy car” did switch to electric, and that the electric market needs to develop the cheap and compact urban car for middle-class person who can’t afford a car above 20 thousands euros (Because to be realistic the era of 10 000 EUR car is over)
I simply can’t understand how Tesla market valuation is so high
The price of very large publically traded companies is set entirely by supply and demand. Yes, those shares do represent a tiny share of ownership in the company, which means a share in the profits and assets of the company. But there is no law tying them together. Tesla’s market value is so high because there are more buyers than sellers, it’s as simple as that.
Just to clarify, supply and demand refers here to supply and demand for the stock, not for the product (cars).
Generally, the two will be related. Sometimes, however, investors see a stock going up and they consider it valuable because they see it performing well, creating a self-fulfilling prophecy. This is how bubbles are made.
The Tesla stock is keeping afloat exclusively due to the perceived worth of the Tesla stock. It could keep increasing if the perceived value keeps increasing. At some point it will almost certainly fail spectacularly, but if this happens tomorrow or in ten years is anybody’s guess.
There is are laws that ties them together. When then company goes bankrupt all shares stop trading (not when they declare bankruptcy, it will be later in the process) thus forcing the value to zero. When someone else buys the company all shares are force sold aa an agreed upon price (you get to vote on the price but if you vote no and lose you still sell) thus forcing the final trading price. There are also ways for a company to be delisted based on something the company does - the stock can still be traded but it becomes much harder without an exchange and so the effective value is zero (or maybe a few cents if you can figure out how to trade anyway).
However the above are all things that don’t happen very often to any one company. Nearly every week has several companies do one of the above, but if you are looking at a specific company it will probably be decades before the above happens and those are decades where the price is whatever supply and demand wants it to be. Because of the above threats long term the value of a company tends to correlate to the company size / value, but that long term can be decades.