Tesla becomes highest-valued US automotive company

Posted on 13 Apr 2017 by Michael Cruickshank

US automaker Tesla rose to hold the title of the country's most highest-valued car manufacturer after its share price increased this week.

The company’s share price peaked at around $294.65 per share on Tuesday, giving it a total market value of over $50bn.

This put the company ahead in market capitalization of much larger car companies such as Ford and General Motors.

Such a valuation goes against the company’s recent performance: in 2016, Tesla recorded a net loss of over $675m, while both GM and Ford recorded multi-billion dollar profits.

Indeed, Tesla has only had two profitable quarters in its entire history as publicly-traded company, mostly due to its massive spending on research and development.

Faith in Tesla as a game changer

It is likely that the astronomical stock price of Tesla is due to investors factoring in the company’s potential to transform the car industry.

With more and more companies and businesspeople coming onboard with the idea of electric vehicles, Tesla could see massive prospects for growth.

Among the most hotly anticipated products announced by Tesla is the Model 3, a mid-range battery electric EV which many believe could corner, as well as expand this market.

As evidence of the potential of these vehicles, competitors, such as Faraday Future have rushed to unveil their own mass-market EVs.

Another reason for the high stock price of Tesla is due to the fact that it is no longer just a car company. Instead, Tesla is now expanding significantly into other high-tech products including solar panels.

Moreover, through the company’s Gigafactory, it is revolutionizing the manufacturing of Lithium-ion batteries, reducing their price points, and presenting them as a viable energy storage solution.

Tesla CEO Elon Musk himself acknowledged on Twitter that his company’s stock price was overvalued.

“Tesla is absurdly overvalued if based on the past, but that’s irrelevant. A stock price represents risk-adjusted future cash flows,” Musk tweeted.

Since its highs on Tuesday, Tesla’s stock price has since slipped by about 4%.