Tesla shares closed trading on Monday at $312.39, valuing the automaker on Wall Street at $51.5 billion. GM’s stock ended at $33.97, giving it a market cap of $50.2 billion. Tesla overtook Ford (F), whose $44.6 valuation makes it the third-largest U.S. car maker, last week.
Tesla’s exploding market cap indicates investors are increasingly seeing electric vehicles -- and renewable power in general -- as the future of driving. Proponents believe Tesla will become a clean-energy and transportation heavyweight, and they argue its valuation is reasonable based on long-term expectations for Tesla’s growth. They also point to opportunities from the automaker’s acquisition last year of solar panel installer SolarCity and Tesla’s Nevada battery cell plant aimed at driving down manufacturing costs.
Shares of the Palo Alto, California-based company, which is only 14 years old and which has been public for less than seven years, are up over 40 percent this year. It sold about 76,000 vehicles in 2016, missing its target of 80,000, and has never made a profit.
By comparison, GM sold over 10 million cars and trucks worldwide last year, while Ford sold 6.7 million.
Not everyone thinks Tesla will have an open road to dominance in the U.S., arguing that is growth targets are unrealistic. It also could be overtaken by GM, Ford and other deep-pocketed car makers that are quickly ramping up their own electric-vehicle offerings.
Tesla is “in a space where, initially, they were all alone, but by 2018, 2020, we’re going to see a lot more electric [vehicles] and a lot more autonomous driving technology,” Stephanie Brinley, a senior analyst at IHS Markit, told CBS MoneyWatch. “While Tesla’s talked about it a lot more, all of these components have been in development at many automakers for decades.”
Jeffrey Gundlach, who oversees more than $105 billion in assets at Los Angeles-based DoubleLine Capital, told Reuters last week: “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.”
Tesla’s market cap is now equivalent to $102,000 for every car it plans to make in 2018, or $667,000 per car sold last year. By comparison, GM’s cap amounts to $5,000 per car it sold in 2016.
The Silicon Valley car company is rushing to launch its mass-market Model 3 sedan in the second half of 2017 and quickly ramp up its factory to reach a production target of 500,000 cars per year in 2018.
“Tesla is very much mission-oriented, and the mission is to get people on renewable energy,” Brinley said. “That means in some respects, they’re willing to take a different level of risk.”
Tesla will be the sixth-most-valuable automaker globally if it closes trading above GM. It’s behind Toyota Motor Corp., whose market cap is about $52 billion; Daimler AG; Volkswagen AG; BMW AG; and Honda Motor Co.