PopularSurprising SciencePersonal GrowthMind & BrainSex & RelationshipsTechnology & InnovationCulture & ReligionPolitics & Current Affairs
Tesla's market cap surpassed that of GM and Ford on April 10, 2017.
18 April, 2017
Tesla showroom in New York [Photo: Spencer Platt/Getty]
Tesla’s market cap reached about $51 billion on April 10, briefly pushing the company ahead of GM and Ford as the most valuable car manufacturer in the U.S.
<p dir="ltr">The news was shocking for a few reasons. Despite their similar valuations, Tesla doesn’t produce on par with that of GM and Ford. In 2016, Tesla manufactured about <a href="http://www.slate.com/articles/business/the_juice/2017/04/why_tesla_s_stock_is_in_ludicrous_mode.html" target="_blank">100 times fewer cars than GM, and Ford reported about 20 times the revenue</a> of Tesla.</p> <p dir="ltr">So how is Tesla valued so richly?</p> <p dir="ltr"><br><a href="https://www.statista.com/chart/8925/tesla-vs-gm-and-ford/" title="Infographic: The Numbers Behind the 'New Big Three' | Statista"><img type="lazy-image" data-runner-src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8xODMzOTIxNi9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTYxNjc5OTE4N30.eWr_AbXYZ_jFidWb5C_O8Cv37Ljx7BM9XXZ6-nTm4jM/img.jpg?width=980" id="3b739" class="rm-shortcode" data-rm-shortcode-id="9d41198ed3581802263d9101afbe25a8" data-rm-shortcode-name="rebelmouse-image"></a></p> <p>The answer probably lies in how some investors see Tesla as poised to lead the future of the automobile industry. Tesla CEO Elon Musk announced plans to produce <a href="http://www.vox.com/new-money/2017/4/4/15176904/tesla-ford-stock-price" target="_blank">500,000 cars in 2018, and about 1 million by 2020</a>. And while big car manufacturers might follow suit by shifting resources to produce more hybrid and electric cars, Tesla already has the advantage of getting batteries from its own <a href="http://www.businessinsider.com/tesla-gigafactory-facts-2016-9" target="_blank">Gigafactory</a>—a massive multibillion-dollar facility that produces lithium-ion batteries on which electric cars run. <br><br>Investors also seem to be confident about Musk's other pursuits. In addition to producing batteries for cars, the Gigafactory makes batteries that could one day <a href="http://www.vox.com/new-money/2017/4/17/15293892/tesla-batteries-gigafactory-bet" target="_blank">substitute traditional electricity sources</a>. The company is also designing <a href="https://www.tesla.com/blog/battery-cell-production-begins-gigafactory" target="_blank">solar panels</a> that look like roof tiles and can power entire homes. And, oh yeah, Musk has this little side project where he wants to make mankind an interplanetary <a href="http://www.cnn.com/2017/04/01/opinions/elon-musk-change-rules-of-space-travel-lincoln/" target="_blank">species by colonizing Mars through SpaceX</a>. <br><br><img type="lazy-image" data-runner-src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8xODMzOTIxNy9vcmlnaW4ucG5nIiwiZXhwaXJlc19hdCI6MTYxMDM3MzMxN30.8fObRAPgAoGWZzuuI3OplqJNbtwIgkaihuywvkClfAA/img.png?width=980" id="98f99" class="rm-shortcode" data-rm-shortcode-id="033940ff33074710f139b6b09da768f3" data-rm-shortcode-name="rebelmouse-image"><br><em>(Google Finance)</em> </p> <p>Another reason GM and Ford are valued similarly to Tesla might be due to their mammoth size. Both <a href="http://www.slate.com/articles/business/the_juice/2017/04/why_tesla_s_stock_is_in_ludicrous_mode.html" target="_blank">spend huge amounts on advertising and getting stuck with excess inventory</a>. For instance, Ford and GM spent a combined $7.2 billion on advertising in 2015 — more than Tesla's total revenues of $7 billion in 2016. Meanwhile, Tesla spends little on commercials and sells every car it makes almost instantly. <br><br>But despite Tesla's lean, forward-looking mentality <a href="https://www.nytimes.com/2017/04/06/business/tesla-story-stocks.html?_r=0" target="_blank">some analysts remain skeptical</a> of its high valuation. And there's reason to be: Tesla has <a href="http://www.businessinsider.com/tesla-value-vs-ford-gm-chart-2017-4" target="_blank">yet to prove it can manufacture its vehicles on a mass scale</a>, Musk might be spread too thin with his job as SpaceX CEO, and it remains unknown if Tesla's <a href="http://www.vox.com/new-money/2017/4/17/15293892/tesla-batteries-gigafactory-bet" target="_blank">Gigafactory investment will pay off</a>. </p> <div class="video-full-card-placeholder" data-slug="elon-musk-why-im-betting-on-solar" style="border: 1px solid #ccc;"> <div class="rm-shortcode" data-media_id="QKrlFqA8" data-player_id="FvQKszTI" data-rm-shortcode-id="6c807171e0665d3010638cd3bedb538b"> <div id="botr_QKrlFqA8_FvQKszTI_div" class="jwplayer-media" data-jwplayer-video-src="https://content.jwplatform.com/players/QKrlFqA8-FvQKszTI.js"> <img src="https://cdn.jwplayer.com/thumbs/QKrlFqA8-1920.jpg" class="jwplayer-media-preview"> </div> <script src="https://content.jwplatform.com/players/QKrlFqA8-FvQKszTI.js"></script> </div> </div> <p> </p>
Keep reading Show less