This week, Tesla passed Ford and General Motors in market capitalization to become the most valuable American carmaker. Tesla’s stock price is on a tear, up nearly 42 percent since the beginning of the year to more than $300 per share, and the company is currently valued around $53 billion.
Tesla is still well behind huge foreign automakers like Daimler and Toyota, but the news of upstart Tesla (which also is making significant investments in non-automotive spaces like solar panels and energy storage) moving past 100-year-old brands like Ford and GM is getting a lot of attention.
The question of why Tesla, which lost $675 million on $7 billion in revenue last year, is worth more than GM (with 2016 revenue of $166.4 billion and net income of $9.43 billion) and Ford (with 2016 sales of $151.8 billion and net income of $4.6 billion) is a complicated one. Elon Musk has told a story of hope around Tesla, convincing many investors that it will change the world and create massive profits down the road.
Still, Tesla investors see promise, especially if they value growth over profit. Over the past four years, the electric car firm has more than tripled its sales, while revenue at both Ford and GM have been largely flat over the same period.
“Elon has managed to tell a compelling story in how he’s positioned Tesla,” said Karl Brauer, executive publisher at Kelley Blue Book. “Between the Gigafactory, the solar panel company, and the autonomous technology embedded in every Model S and Model X being produced, Elon can claim to be ahead of traditional automakers on the road to self-driving cars powered by renewable energy.”
The idea, it seems, is that Tesla will eventually make lots of money by selling electric (and self-driving) cars and solar panels, as well as standalone energy storage to residential, commercial, and industrial users. All of these could make Tesla lots of money — though it’s not happening yet.
One report suggests that traditional automakers like GM, Ford, Daimler, and BMW remain ahead of upstart Silicon Valley firms like Waymo, Uber, and Tesla when it comes to self-driving tech — but investors don’t appear to care.