Speeding up
Investor faith steers Tesla to top spot
Luxury electric-car company Tesla has yet to turn a profit, losing hundreds of millions of dollars last year alone. But yesterday, the darling of Silicon Valley became the most valuable American car company, surpassing General Motors, the Detroit granddaddy with US$10 billion ($14b) in sales on nearly 10 million vehicles.
Shares of Tesla, run by chief executive Elon Musk, put the company’s value at US$51.5b, above GM’s US$50.2b. Tesla blew by Ford, US$44.6b, last week.
Musk’s company produced just 84,000 cars last year, with starting prices of US$68,000.
The story of Tesla’s rise speaks to the divided American economy in 2017. Eco-friendly government tax credits, a boom in financial backing and the promise of futuristic innovation have created in Tesla a badge for the drivers who can afford its lofty prices.
At the same time, Tesla, with its saga of production problems, hasn’t come close to fulfilling its mass-market ambitions. Beyond selling far fewer cars than its Detroit rivals, its automated factories employ a fraction of GM’s factory workforce.
Tesla’s stockmarket rise has made Musk one of the country’s richest people and given him widespread influence, including another meeting with President Trump today. But even critics who say Tesla could represent a technology bubble in the stockmarket acknowledge that the company’s success points to a new reality in the automotive industry that will reshape the experience of driving for most Americans.
Tesla has two models for sale and a third due this year. The Model S starts at US$68,000 and goes up to US$134,000, depending on power and speed. The Tesla Model X, its sport-utility vehicle, begins at US$85,000.
Its midmarket entry, the long-awaited Tesla Model 3, is expected to hit showrooms in the second half of the year and is priced around US$35,000. At that price, the Model 3 will compete with GM’s Chevrolet Bolt.
Ivan Feinseth, chief investment officer at Tigress Financial Partners, said Tesla competes in a rarefied market.
“The car is a highperformance, luxury car that happens to have an electric engine,” Feinseth said. “It competes with BMW, Mercedes and Lexus.”
The stratospheric climb of Tesla’s stock price from US$40 in 2013 to more than US$312 in trading yesterday, propelled the company to its highest value yet. Feinseth said when you look at Tesla’s potential for growth, its dealer network, supply chain and the quality of the Tesla car itself, the value makes more sense.
“It’s not unusual to value growth companies even to the point of being a little crazy,” Feinseth said.
Tesla’s reputation as beyond-acar company — it recently absorbed Musk’s Solar City company for US$5b — has captured the imagination of California’s technology pack and, apparently, investors. The company has been developing batteries that could store power from rooftop solar panels, expanding its mission into a renewable-energy enterprise. Tesla also is exploring technology for self-driving cars.
“The market is willing to say I’m going to value you based on what I think your future potential is,” said Matthew Stover, an analyst with Susquehanna Financial Group. “It’s all speculative.” Musk, 45, is a South African-born Canadian American business mogul with an estimated net worth of US$14.8b, according to the latest estimates by Forbes magazine. He made his fortune selling moneytransfer service PayPal to eBay in 2002 for US$1.5b. Despite’s GM’s dominance in car sales (its US market share is 17.3 per cent, Tesla’s 0.2 per cent), analysts admire what Musk has built. “Making cars is a hard business,” Feinseth said, “and putting together in such a short time a state-of-the-art manufacturing facility along with a dealer and showrooms and a support network of service centers and charging facilities, that is very hard.” Stover says Tesla still has to prove it can make money. Its rise, he says, “says a lot more about the stockmarket than . . . the auto industry.”