What Elon Musk Needs to Do at Tesla to Maintain Top-10 Billionaire Position

  • Elon Musk was the world’s 35th richest person at the beginning of the year.
  • Tesla’s parabolic stock surge has helped Musk add over $35 billion to his net worth in 2020.
  • Musk owns about 19% of Tesla.

Tesla (NASDAQ:TSLA) CEO Elon Musk is currently the world’s seventh-richest person. Since the beginning of the year, he has jumped 25 spots as his net worth skyrocketed.

As of July 10, Elon Musk’s net worth was valued at $70.5 billion. | Source: Bloomberg

Although Musk catapulted through the billionaire rankings with relative ease, the next crop of people will be much harder.

Most of the billionaires he overtook this year in lower-growth industries such as commodities, real estate, food and beverage, and manufacturing. The climb ahead will not be easy as tech billionaires dominate.

With Musk’s net worth mostly tied to Tesla, the electric carmaker’s stock will have to keep rising faster than the assets of other top tech billionaires. That’s the only way he gets into the top ten and stays there indefinitely.

Here’s how Musk can increase the electric carmaker’s value–and his wealth.

1. Tesla should enter cannibalization-free categories

Cannibalization has become a real risk for Tesla. The Model 3 sedan has gradually been cannibalizing Model S sedan sales and is now Tesla’s best-selling vehicle.

This seems to have caught Tesla off guard.

In Q4 2017, just a few months after the Model 3 was released, Tesla delivered 28,425 Model S and Model X vehicles. Only 1,542 Model 3 vehicles were delivered.

At the time, Tesla noted in the results:

There had initially been concerns about whether Model 3 would cannibalize Model S and Model X. It seems the opposite is true. In stores where Model 3 is on display, customer foot traffic has increased considerably and orders for Model S and Model X have in fact increased.

It turns out Tesla didn’t see the tide turning. In the most recent quarter, Tesla delivered 12,091 Model S/Model X cars and 50,928 Model 3/Model Y vehicles. With the Model Y deliveries only having started in March, most of the sales in this category were Model 3 sedans.

Now there are fears that the Model Y could cannibalize the Model 3 as the production of the crossover ramps up. Tesla’s second-quarter is the first full quarter of Model Y deliveries.

A pattern of newer models cannibalizing older ones is emerging at Tesla. | Source: @CNBCPro/Twitter

To stop this pattern of cannibalization repeating itself, Tesla needs to enter entirely new categories such as delivery vans and minivans. The Tesla Semi and the Cybertruck are promising in this respect but might not be enough.

2. Build cheaper Tesla models for China

Tesla’s decision to build the Shanghai Gigafactory was brilliant as the Chinese market has proved to be a bright spot. Model 3 sales in China rose 35% last month after Tesla lowered its price, which allowed buyers to capitalize on government subsidies.

If Tesla produces a cheaper car for China, it is bound to win the hearts and wallets of the world’s largest auto market. For example, electric carmaker BYD outsold the Model 3 in April because of the lower price point for its Qin EV model.

3. Elon should go on a shopping spree

Electric and autonomous vehicle startups are starting to look cheap amid the pandemic. In June, Amazon (NASDAQ:AMZN) agreed to pay just over $1 billion for self-driving vehicle startup Zoox. The startup had been valued at over $3.2 billion in a 2018 financing round.

Financing challenges have lowered startup valuations. | Source: @SAI/Twitter

With shares averaging over $1,300 apiece, Tesla could easily raise more money by floating more shares like it did in February.

Last year, Tesla purchased Maxwell Technologies, a battery and ultracapacitor manufacturer. Elon Musk needs to get more aggressive to grow his list of valuable technologies and ensure that Tesla maintains an edge in the overcrowded EV market.

Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com. The author holds no investment position in the above-mentioned securities.

Last modified: July 12, 2020 6:11 PM UTC

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