Here’s why some automakers top the m-cap charts

The value assigned by investors to automobile companies does not hinge just on annual sales volumes. A lot depends on the product mix or the share of the earnings from premium cars and also on the average realisation per vehicle. Typically, larger the share of the premium cars in the business mix, higher will be the market valuation. For instance, Ferrari which sold 8,014 cars with average realisation of $428,850 per unit in the past fiscal, commands a market capitalisation of $20.3 billion. Similarly, US car maker Tesla has a market cap of $51.5 billion and sold 76,285 cars in the previous fiscal, according to Bloomberg data. Based on the last fiscal revenue of $7 billion, Tesla’s average realisation works out to be $91,762 per car. This means, market cap per car sold in a year was $2.5 million for Ferrari and $675,332 for Tesla.

In comparison, the world’s top two car makers Toyota and Volkswagen (by volume and market cap) have valuation per car at $22,565 and $9,955 — a fraction of the value commanded by Ferrari and Tesla. Toyota and Volkswagen sold nine million and 10.3 million cars, respectively, in 2016.

The price-earnings (P/E) multiple of Toyota and Volkswagen was 10.1 and 6.7, respectively, based on next year’s projected earnings. On the other hand, Ferrari trades at a forward P/E of

30. Maruti Suzuki, India’s largest car maker, has market cap of $25,524 per car and a forward P/E of 25.5. Maruti Suzuki commands premium to global carmakers thanks to the dominant market share position in the one of the fastest-growing car markets in the world.