Tesla, the already iconic electric vehicle, solar and battery storage maker, on Monday overtook General Motors to become the most valuable car company in the US, with a market worth of $US51.5 billion ($A68 billion).
The 3.3 per cent jump in its share price on Monday means that Tesla is now more valuable than both GM and Ford, and every other US car company, even though it has yet to turn an annual profit and makes just a fraction of its established rivals – 84,000 cars versus 10 million in the case of GM.
The soaring share price of the California upstart can be either dismissed as hype, or notched up to the fact that investors are buying CEO and founder Elon Musk’s promise to rid the world of fossil fuels. He is already helping to upend the business models of the multi-trillion dollar automotive and energy industries.
Tesla currently has two models on release – the luxury and high performance Model S sedan and the Model X SUV – with the “man market” Model 3 to follow next year and the Model Y a year or two after that. It all adds up to S3XY.
The 45-year-old Musk, who is also planing passenger flights around the moon, and then to Mars, and is already delivering payloads to the international space station through SpaceX, is now one of the richest people in the US, with an estimated value of $US13 billion.
Not everyone is buying the Tesla story, though – not least those car rivals Tesla has overtaken in value, but who are now competing with their own EV models.
“This is the ultimate bubble, which is doomed to burst,” former GM vice chairman Bob Lutz told the Washington Post. “Tesla cars are fine, but the business model is not.” But, he admitted, all legacy car companies would soon have a variety of similar electric vehicles.
But many people are (obviously) buying the story. The Washington Post said one analyst is predicting the share price will fly to $US368 a share, up from around $US301 now, despite the predicted lack of profits. That recommendation was described as “one of the more absurd I’ve seen in a while” by Michael Farr, president of Farr, Miller & Washington, a D.C. investment firm.
Bloomberg reported that Tesla is now within $US1 billion of Honda, and within reach of cracking the top-five automakers worldwide, which are Toyota ($US172 billion), Daimler AG, Volkswagen AG, BMW AG and Honda.
“Tesla engenders optimism, freedom, defiance, and a host of other emotions that, in our view, other companies cannot replicate,” Bloomberg quoted Alexander Potter, an analyst at Piper Jaffray, who upgraded the stock on Monday after owning a Tesla for seven months and meeting with management.
“As they scramble to catch up, we think Tesla’s competitors only make themselves appear more desperate.”
“The market cares more about the potential new market value of the other businesses Tesla is in than about real profits and cash flow,” David Whiston, an analyst at Morningstar told Bloomberg.
“Right now there is nothing to slow Tesla’s momentum. They could pass Honda, too.”
