For the first time ever, Tesla has overtaken Ford and General Motors in terms of market value.
That makes Elon Musk’s electric-vehicle producer the auto manufacturer with the biggest market capitalisation in the United States.
The company, however, is not yet profitable, unlike Ford and GM which both enjoy strong profits and healthy balance sheets. That doesn’t seem to matter to investors, with Wall Street far more excited by Tesla’s future than that of traditional car makers.
Tesla, with its the potential for dramatic growth turning investors’ heads from the established leaders, overtook the two giants in April. Its share price soared 35 percent in a month, putting the company’s value over US$50 billion.
Experts attribute the growth to the belief that Tesla is best placed to benefit from the coming shift to electric and automated vehicles.
Tesla said its first-quarter sales in the US were up 69 percent from the same period a year ago. Meanwhile, conventional automakers struggled to meet last year’s performance.
Nonetheless, GM and Ford are as financially healthy as they’ve ever been, which places them in a very good position for the future.
Both companies have rebounded steadily since the 2008 financial crisis, even though GM filed for bankruptcy and needed a US$49 billion government bailout to recover.
However, it appears that Walls Street doubts either manufacturer has yet buttressed itself from larger economic cycles or is at the cutting edge of self-driving and electric car technology.
Giants take action
GM recently decided to sell its money-losing European division, while Ford is attempting to accelerate its move to electric and autonomous vehicles. Both automakers have bought technology companies to bolster their in-house engineering expertise, and their executives have embraced the chance to work with the Trump administration on scaling back government regulations.
Both companies are ranked near the bottom in price-to-earnings ratios for the companies that make up the Standard & Poor’s 500 index. However, based on production, they are in a different league from Tesla. Both sell more than 200,000 vehicles a month in the US, while Tesla’s monthly figures are around 4,000.
Once Tesla begins producing the Model 3 this year, Mr Musk expects production to ramp up quickly, with a goal of making 500,000 cars a year by next year. However, achieving that target would require volume growth of 500 percent, something no car company has ever done in such a short timeframe.
Investors will watch with interest.