Despite being one of the world’s most valuable companies like BlackRock, Eli Lilly, and Meta Platforms, Tesla (ticker: TSLA) is conspicuously absent from the Dow Jones Industrial Average (DJIA). The reason lies in the Dow’s unique design and selection process.
At the time of writing, Tesla trades at $458 per share, which would make it one of the most expensive Dow components if it were included. Every $1 move in Tesla would swing the Dow by roughly 6 points (given the current divisor), so adding Tesla could swamp the contributions of the other 29 companies.
Historically the Dow’s committee has shied away from stocks that would “dominate” the index by price alone. For example, Amazon only joined after a 20-for-1 split dropped its effective price from $2,400 to $174. Tesla’s share is still high enough that the committee likely views it as too large a “weight on a single component,” in effect.
Why the Dow Committee Keeps Pure Automakers Out
The Dow’s components are picked by a committee, not by formula. Notably, no pure auto manufacturers currently sit in the Dow’s 30. General Motors and Ford had a long history in the old Dow, but GM was kicked out during its 2009 bankruptcy and never reinstated. When GM left, Cisco (a tech company) took its place, with Dow officials explicitly saying that Cisco’s networking products were “vital to an economy and culture still adapting to the Information Age – just as automobiles were essential to America in the 20th Century.” In other words, the Dow shifted its emphasis to technology for the 21st century and left traditional automakers behind.
Today the index includes tech giants like Apple, Microsoft, and Nvidia, but it still tracks transportation and utilities stocks in separate Dow averages. Because Tesla straddles auto, tech, and energy sectors, it doesn’t fit neatly into the Dow’s traditional mix of sectors the committee targets.
Tesla’s High Price and Volatility: Too Wild for the Dow’s Stable Blueprint
Tesla is indeed massive. As of today it ranks around the 8th largest public company globally, approximately $1.53 trillion market cap (TradingView). But the Dow isn’t guided by market cap. Its focus on share price means a giant company can be left out if its share price is unusually high. Even after multiple stock splits, Tesla’s price remains above most Dow stocks.
More to the point, Tesla is a volatile, growth-oriented company, whereas the Dow has historically valued stability and a long track record. The index emphasizes established consumer, financial, healthcare, and industrial names that show consistent profits over decades. Tesla is still relatively young, with a charismatic but controversial CEO, Elon Musk, and its fortunes swing widely with investor sentiment about electric vehicles and AI. It’s possible the Dow committee sees that volatility and decides it doesn’t match the “sustained growth” profile they prefer.
Because the Dow has only 30 slots, adding Tesla would require dropping another stalwart. So far there’s been no precedent or clear candidate to remove in favor of Tesla. The companies in the Dow span a broad range, from Coca-Cola to Caterpillar to IBM, and Tesla wouldn’t overlap with any of them. If the committee wanted more representation in the cutting-edge tech/auto space, it might consider swapping out a slower-moving name, but any such decision is entirely discretionary.
The Bottom Line: Tesla’s Dow Snub Is By Design, Not Conspiracy
To sum up, Tesla’s absence boils down to index design, not an assessment of its importance. The Dow simply measures a different cocktail of companies than what modern market-cap indices do. Its price-weighted, committee-driven approach naturally screens out Tesla’s high-priced, auto-centric stock.
As one commentator put it, this doesn’t make Tesla any less significant in the economy, it just means “the Dow is the Dow,” with its own old-school rules.
Author: Richardson Chinonyerem
The editorial team at #DisruptionBanking has taken all precautions to ensure that no persons or organizations have been adversely affected or offered any sort of financial advice in this article. This article is most definitely not financial advice.
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