Tesla market value races ahead of GM, Ford's combined worth

Tesla chief executive Elon Musk on stage with owners of the China-made Tesla Model 3, at a delivery event held in its Shanghai factory on Tuesday. PHOTO: REUTERS
Tesla chief executive Elon Musk on stage with owners of the China-made Tesla Model 3, at a delivery event held in its Shanghai factory on Tuesday. PHOTO: REUTERS

SAN FRANCISCO • For the first time, Tesla's stock market value has eclipsed the combined worth of General Motors (GM) and Ford.

The Silicon Valley electric carmaker's stock jumped nearly 5 per cent on Wednesday, closing at a record US$492.14 per share and elevating its market capitalisation to almost US$89 billion (S$120.3 billion), or US$2 billion more than the sum of GM's and Ford's respective market caps of US$50 billion and US$37 billion.

Fuelled by a surprise third-quarter profit, progress at a new factory in China and better-than-expected car deliveries in the fourth quarter, Tesla's stock has more than doubled in the past three months.

"It's clear that Tesla is back to being a story stock and there's a lot of good news out there," said Mr David Kudla, chief investment strategist at Mainstay Capital Management.

"But there are still some problematic issues out there, chief among them is what will its sustained profitability look like, and when will it start to be valued like a car company and not a tech company."

The progress made by Tesla chief executive Elon Musk has defied short sellers and other traders expecting the automaker to be overtaken by long-established car companies, including GM and Ford.

Underscoring investors' confidence in Mr Musk and his company's future growth, its market capitalisation has outpaced its US rivals, even as their businesses dwarf Tesla's. GM and Ford each delivered more than two million vehicles in the United States last year, compared with Tesla's worldwide deliveries of 367,500 vehicles.

While Tesla's recent progress has cheered supporters, many analysts and investors remain pessimistic about the firm's ability to consistently deliver profit and cash flow.

The company has repeatedly missed targets in recent years and Mr Musk's mercurial behaviour has come under close scrutiny from financial regulators and shareholders of Tesla.

However, most mainstream automakers are still ramping up new generations of electric vehicles designed to compete with Tesla's combination of style, technology and performance.

German automakers Volkswagen, Daimler and BMW all have promised to launch fully electric premium models.

GM's Cadillac luxury brand is gearing up to launch a series of electric sport utility vehicles and cars, while Ford's Mustang Mach-E electric SUV, unveiled in November, will launch later this year and could compete with Tesla's Model X or soon-to-launch Model Y SUVs. Ford, GM and other manufacturers have electric pickups in the works to take on Mr Musk's futuristic Cybertruck.

Rival electric vehicle models from Audi, Jaguar and Porsche have fallen short of Tesla's driving range between charges and failed to match Tesla's brand cachet.

More analysts rate Tesla "sell" than "buy", which is extremely unusual for companies on Wall Street. Eleven analysts recommend buying Tesla shares, while 13 recommend selling and another nine are neutral, according to Refinitiv data.

Shares of GM are about unchanged over the past 12 months, while Ford's stock has risen 10 per cent, both drastically underperforming the broader market, with a slump in China car sales hurting investor sentiment in both firms.

REUTERS

A version of this article appeared in the print edition of The Straits Times on January 10, 2020, with the headline 'Tesla market value races ahead of GM, Ford's combined worth'. Print Edition | Subscribe