April 11, 2017

Image credit: Paul Corson

The electric automaker has surpassed its established rival, GM, in market capitalization to become the most valuable car company in the US.

Stock market cap at $52 billion

In another symbolic milestone, Tesla’s stock market cap surpassed that of GM for the first time ever. The electric automaker is valued at around $52.54 billion at the time of this article’s publication whereas GM is valued at $51.28 billion. Market capitalization is the value of all outstanding shares multiplied by the trading price of the stock, meaning Tesla is now the most valuable car company in the US.

That’s quite impressive given the short history of the company – a mere 13 years compared to GM’s 100 years of expertise in the auto industry. And it’s even more impressive considering Tesla currently only has three car models.

Future-looking money

It’s not hard to see that the valuation is more future-looking rather than based on raw sales numbers. Tesla has sold a modest 25,000 cars last quarter, which isn’t all that significant when compared to hundreds of thousands that traditional car companies like GM sell. On top of that, due to the types of investments the company makes, its profitability isn’t particularly high either.

Then where did the $52 billion come from? Mostly from the potential that people see in the company. Tesla is expected to start delivering the highly-anticipated Model 3 later this year, and if things go as planned, the Model 3 might be the first vehicle from Tesla to sell in large numbers. A combination of the changes in auto industry’s norms and the imminent launch of Tesla’s affordable vehicle seems to have brought this surprising market shift.

Leave a comment