Elon Musk’s Tesla Inc. is now officially the most valuable U.S. Car maker today. It edged out General Motors by having the largest market capitalization. Early Monday, Tesla reached a record stock price high of $312.39, creating a market value of $50.887 billion. This value exceeds GM’s market value around $1 million.
However, compared to Japan’s Toyota Motor Corp market capitalization of $173 billion, Tesla has a long way to go.
Throughout March 2017, Tesla’s stock surged by 35% as investors remain optimistic that Tesla will lead the revolution in the energy and automobile markets.
Tesla is based in Palo, Alto, California and will release its much-anticipated Model 3 sedan in the second half of this year. It is aiming to produce 500,000 annually starting next year.
Michelle Krebs, an auto analyst at Autotrader.com, said, “The real test for Tesla comes when it launches the Model 3, the high-volume, mainstream-priced electric vehicle that is supposed to help the company achieve profitability.”
The Model 3 will be sold at around $35,000 and will compete with Ford’s all-electric focus and GM’s Chevrolet all-electric Bolt. Ivan Feinseth, chief investment officer of Tigress Financial Partners, said, “The car is a high-performance, luxury car that happens to have an electric engine. It competes with BMW, Mercedes, and Lexus.”
In 2016, Tesla sold 76,230 vehicles while Ford sold 6.7 million and GM sold 10 million cars.
Alexander Potter, analyst at Piper Jaffray, said in a report, “Tesla isn’t just another company. More so than any stock we’ve covered, Tesla engenders optimism, freedom, defiance, and a host of other emotions that, in our view, other companies cannot replicate.”
Jeffrey Gundlach, a fund manager, overseeing over $105 billion in assets at DoubleLine Capital, said, “As a car company alone, Tesla is crazy high valuation. As a battery company- one that expands and innovates substantially- maybe the valuation can work.”
Some analysts are skeptical. Former GM vice chairman Bob Lutz, said, “This is the ultimate bubble, which is doomed to burst. Tesla cars are fine, but the business model is not.” He says that a big problem with Tesla is its high cost of production which is not reflected in its sale price.
Matthew Stover, analyst at Susquehanna Financial Group, said, “The market is willing to say I’m going to value you based on what I think your future potential is, and it could be off of what you think they could make selling cars, what they could make selling batteries, what they could make selling solar or what they could make as a mobility company. Everything is on the table, and it’s all speculative.”
Elon Musk was born in South Africa and has an estimated net worth of $14.8 billion. He made $1.5 billion in 2002 when he sold Paypal to eBay.
Over the past three years, Tesla has made a total loss of $1.9 billion. Last year, it acquired unprofitable solar panel installer SolarCity. Globally, Tesla is now the 6th most valuable automaker.
Categorized as: Business