Tesla vs. Toyota - September 10, 2025

By now, you have likely heard about the massive pay package Tesla’s Board of Directors are planning to award its’ CEO, Elon Musk.  This compensation package could make Musk the world’s first trillionaire…*trillionaire*.  

In researching this story I learned that Tesla’s value as a business, known as its market capitalization, or “market cap”, was 1.1 trillion dollars. That got me thinking about how that valuation compares to the more established car companies, such as Toyota, which is generally considered the largest car company in the world.  We’ll dive into this in more detail in this article, but the answer is that Tesla doesn’t even make the top ten, in term of vehicles sales volume, while Toyota ranks #1, as expected. Yet Tesla is worth 4.3 times more than Toyota.  We’ll try to understand why that is the case, but I’ll tip my hand a bit and tell you now that Tesla’s valuation is driven by its CEO, Elon Musk.  It was Musk that drove the creation of a new product category, electric vehicles, in the face of decades of competitive products from well established competitors such as Toyota, Volkswagen, and General Motors, among others. It is also Musk that turned Tesla into a household name, a globally recognized brand in a relatively short period of time. Ask Nike, Coca-Cola and Starbucks how long and how much money it takes to build and maintain a global brand. Tesla is a car company and a technology company - it’s included in “Magnificent Seven” group of technology  companies that is driving the 2025 performance of the US stock markets’ S&P 500 index (the Magnificent Seven are: Microsoft, Meta (Facebook), Alphabet (Google), Amazon, Apple, Nvidia and Tesla.)

Musk is not the founder of Tesla; he was an early investor, first investing in February 2004 and appointed himself as Chairperson of the Board of Directors at that time.  He allowed someone else to run the company for four years before appointing himself CEO in October 2008.  In those 17 years, it was clearly Musk that drove much of Tesla's success, and it is his absence and distraction  from Tesla over the past two-three years that have led to the company’s recent slump in sales globally, as well as the backlash against the Tesla brand. The public is not happy with Musk’s recent comments on various subjects, and there is considerable anger towards Musk and Tesla because of Musk’s involvement with various political side projects. 

Given all of this, it’s a smart move by the Tesla Board of Directors to offer Musk this lucrative pay package, to help him maintain his  focus on Tesla.  Obviously a trillion dollar pay package would get anyone’s attention, but Musk is already the world’s richest person, with a reported net worth of almost 431 billion dollars. The trillion dollars potentially available to Musk is intended to appeal to his ego, as he’s clearly not hurting for money.  The fact that we’re even talking about these kind of numbers is insanity, but before everyone gets up in arms over Musk’s potential pay package, let’s understand the details: 

• Elon is not getting a salary of a trillion dollars, a billion dollars, or even a million dollars.  

• Musk does not receive a cash salary from Tesla. All of his compensation comes from Tesla shares and options he has been granted in the past. Since there is still an ongoing court fight over 304 million options previously granted to Musk, he has not received any compensation for nearly a decade, since a 2012 pay package made its last disbursement of Tesla options to him in 2017.

• In this new pay package, Elon is getting shares or options to buy shares of Tesla. The company valuation has to increase from 1.1 trillion dollars to 8.5 trillion dollars, in order for Musk to become a trillionaire from this arrangement.  

I'm not a fan of some of Elon’s views and actions, but I have tremendous respect for what he’s accomplished in business, and the difficult business opportunities he’s pursuing. If Elon can lead Tesla to a business valuation of 8.5 trillion dollars, he deserves to be the world’s first trillionaire.  As it relates to this discussion, clearly Tesla’s Board of Directors feel Musk is the key to maintaining and improving the value of Tesla. 

What does it say about the stock markets as a valuation tool for businesses, and what does it say about our society that Tesla is so revered by the general public, recent backlash aside.  

Here are the salient numbers when comparing Tesla and Toyota: 

	Tesla	Toyota
Market Capitalization	~$1.12 trillion	~$262 billion    4.3x higher for Tesla
2024 Vehicle Production	1.77 million	10.8 million    6.1x higher for Toyota
Annual Revenue	~$97.7 billion (2024)	~$311.2 billion (2024)  3.2x higher  for Toyota

Based on this recent data, Toyota outperforms Tesla by a wide margin in both volume of sales and in revenue, but Tesla is valued over four times as much as Toyota.   In July 2020, Tesla's market cap exceeded Toyota's for the first time, reaching around $207 billion compared to Toyota's $202 billion. In 2020 Toyota delivered almost ten million vehicles worldwide. Tesla? A mere 500,000 vehicles in that same year. 

As you can see in the table above, in 2024 Tesla sold approximately 1.8 million vehicles globally, with its first electric vehicle arriving in 2008, “the Tesla Roadster”. Meanwhile, Toyota sold almost 11 million vehicles worldwide in 2024, making it the top-selling automaker globally. However, even though Toyota offered its first electric/gas hybrid vehicle in 1997, with the “Prius”,  in 2024 Toyota sold only 140,000 electric vehicles, significantly less than Tesla's global sales. 

What gives? 

• Future growth vs. legacy manufacturing: Investors view Tesla as a technology platform and energy company, not just a car manufacturer. Its valuation is based on the expectation of massive future growth, including advancements in batteries, software, and autonomous driving. In contrast, Toyota is valued based on its proven track record as a global manufacturing giant.

• Profitability and innovation: While Toyota has higher sales volume, Tesla's focus on high-growth segments and innovative technology has sometimes translated to higher profitability on a per-car basis. Investors are optimistic about Tesla's commitment to battery electric vehicles (BEVs), whereas Toyota has been criticized for being slower to adopt a full electric vehicle strategy.

• Volatility and investor sentiment: The historical market value demonstrates Tesla's rapid, and sometimes volatile, growth. The company's valuation has surged and dropped with investor sentiment, notably exceeding the value of many legacy automakers combined in 2021. For Toyota, a solid balance sheet and steady production volumes anchor its more conservative valuation.

• Beyond car manufacturing: Both companies are expanding their ambitions beyond traditional vehicles. Tesla is investing heavily in stationary energy storage and robotics, which appeals to growth-focused investors. Toyota is also diversifying into broader mobility solutions and hydrogen technology, but its initiatives are less valued by the market. 

Tesla critics say that the stock has become overvalued because of the stock market’s willingness to buy into Elon Musk’s vision of the future in terms of A.I., self-driving vehicles and robots, despite Tesla’s failures to deliver on past promises on these items. Musk is a master storyteller and his stories keep Tesla’s stock price flying high.  At what point will the markets and the public hold Musk and Tesla accountable for its unfulfilled promises on these items? “Elon Musk has been saying since 2014 ‘we will have a fully autonomous car next year.’ It hasn’t happened, but that promise has been valued in the billions by Wall Street,” said analyst Gordon Johnson, one of the harsher critics of Tesla. “Elon Musk is a master manipulator. He’s been able to keep the stock elevated. The reason the board is paying him is he’s willing to say things that other CEOs aren’t willing to say or get away with.”

Tesla is facing growing competition from Chinese electric vehicle makers. BYD, one of those Chinese automakers, is poised to pass Tesla for the most electric vehicle sales worldwide, even though BYD cars are not available for sale in the United States. Within the US market, at one point Tesla held 80% of the market for electric vehicles.  According to Cox, by June of this year Tesla’s market share had dropped below 50%, by July it had fallen to 42% and by August it had further fallen to 38%.  It’s no wonder Tesla’s shareholders and Board of Directors want Musk’s attention focussed on Tesla! 

Tesla also faces competition from other companies that are ahead of it in providing robotaxi services, including Waymo, the autonomous vehicle unit of Google parent Alphabet, which has its own service and has partnered with Uber in some cities.  

Which vehicle would you buy?  Toyota and Tesla represent two different product philosophies: 

• Toyota excels in proven quality and reliability with traditional vehicles and hybrid technology

• Tesla focuses on cutting-edge EV technology, innovation, and performance. 

In 2024, the world bought 1.8 million Teslas. In the same year consumers bought almost 11 million Toyotas. Now, that’s a bit of an unfair comparison because you can’t buy and operate a Tesla everywhere, whereas a Toyota can be purchased and driven anywhere in the world.  But this is why Tesla’s valuation as compared to Toyota doesn’t make sense.  Tesla still has some growing up to do before it can rub shoulders with the adults of the automobile world.  This list shows where Tesla stands amongst the world’s largest automobile manufacturers:

Global Automobile Leaders By Volume, Sold In 2024:

1. Toyota - 10.8M 

2. Volkswagen - 8.3M 

3. Hyundai - 6.9M

4. Stellantis - 6.0M

5. GM - 5.9M

6. Ford - 4.2M

7. BYD - 4.1M

8. Honda 4.07M

9. BMW - 2.4M

10. Mercedes - 2.1M

Tesla -1.8M

Having said all of that, 1.8 million Teslas were sold in 2024. Why is that? 

Choosing between a Tesla and a Toyota, for example, depends on the buyer’s priorities: a Tesla is for a tech-savvy driver prioritizing zero-emission driving and who has access to charging infrastructure. A Toyota vehicle offers proven reliability, lower upfront costs, and the convenience of traditional gas stations. Teslas are known for advanced features, speed and a superior driving experience, but driving a Tesla requires advanced planning for the vehicle’s charging.  A Toyota is reliable, of high quality and can be re-fuelled anywhere. 

 I’ve said it before, a Tesla is a car for gadget geeks!  Having said that, I’m not sure what to make of Tesla’s recently released Cybertruck. My cousin who lives in Southern California  has ridden in one and he described the ride as “floating”,  and riding in a spaceship; whenever I see a Cybertruck on the road, I can’t help but think of a trashcan on wheels!