Tesla VS Volkswagen – Which is the Better Investment?

Most analysts argue that Volkswagen is a better choice than Tesla. However, it managed to overtake Volkswagen with a value of $101 billion. When it first appeared in the market in 2010, Tesla’s valuation was $2 billion. But in just ten years, Tesla has shown an excellent growth spurt. And its sales growth has been more than nine times the industry average during the past decade. Last year, the company opened its largest service center in Germany. It agreed to build its first European car factory in the state of Brandenburg.

Meanwhile, Volkswagen admitted in 2014 that it connived to breach the U.S. Clean Air Act, paying a $4.3 billion fine. Several senior executives were sent to prison. Even so, most of the analysts still recommend Volkswagen, giving it a “strong-buy” label, while they think that Tesla’s stock is overvalued at $558 price for a share.

New CEO Herbert Diess stated this month that the time of the traditional car manufacturers is over. He also emphasized that the magnitude of their task and the brevity of time necessitated by Tesla’s challenge gives them exactly one single try.

During the last few years, Volkswagen lost 4% and rose by 20%, while Tesla skyrocketed with 181% – 120% gains. In 2013, Volkswagen’s $109 billion valuations were seven times more than Tesla. In 2015, this difference eased to $22 billion and, after the first week of January, came down just to $10 billion.

Tesla’s Share Prices Rising

Colin Rusch, the Oppenheimer & Co’s leading analyst, championed Tesla, for the past two years. He increased his target price with a whole 59% from $385 to $612 since Jan. 13. Rusch agrees with Diess about Tesla, who sees the company as Volkswagen’s main competitor. He wrote that Tesla has stumbled through growing pains. But the company has reached a critical scale, which is sufficient to support sustainable positive free cash flow.