For a time on Monday, Tesla edged out GM in market capitalization to become the most valuable U.S. automaker, even though Tesla is on track to lose almost a billion dollars this year while GM is expected to make a $9 billion profit.
The share prices for both car companies dipped today, putting GM ever so slightly back in the lead with a market cap of just less than $51 billion. What’s more, U.S. automakers still fall short of foreign companies such as Toyota and VW. Nevertheless, the rapid rise in Tesla’s share price left some observers predicting a sea change in the auto industry – while others were left just shaking their heads.
“Clearly General Motors is undervalued and Tesla is overvalued,” AutoNation CEO Mike Jackson was quoted as saying at a forum setting the stage for this week’s New York Auto Show. He said Tesla was “either one of the great Ponzi schemes of all time or it’s gonna work out.”
Monday’s rise was fueled in part by an upgraded price target from Piper Jaffray analyst Alexander Potter, who based his bullishness on Tesla’s “it” factor rather than on profits or production. “More so than any stock we’ve covered, Tesla engenders optimism, freedom, defiance and a host of other emotions that, in our view, other companies cannot replicate,” he wrote.
The positive spin is that Tesla is anticipating the coming age of self-driving vehicles better than Detroit’s automakers, and that the company’s Model 3 mass-market entrant will shake up the automotive market dramatically. The Model 3 is due to enter full-fledged production this summer – and Tesla’s billionaire CEO, Elon Musk, is targeting total production of 500,000 all-electric vehicles next year.
The negative spin is that Tesla’s cachet will fade as other automakers get traction with electric vehicles such as the Chevy Bolt and Nissan Leaf, and catch up on the autonomous driving front. Jackson argued that affordable gasoline, made possible in part by America’s fracking boom, will also work against Elon Musk’s all-electric vision.
Despite what the skeptics say, Tesla’s true believers are likely to stick with that vision – which is earning Musk added influence in the halls of power as well as on the trading floor.
Musk, who’s also the CEO of the SpaceX rocket venture, is among a bevy of business executives who met with White House officials today to discuss a range of issues including tax reform and infrastructure development. (For what it’s worth, GM CEO Mary Barra was on the invite list as well.)
The White House says Musk was in on a breakout session with Transportation Secretary Elaine Chao, who’s expected to take a lead role in the Trump administration’s $1 trillion infrastructure plan. Meanwhile, Barra was due to meet with Scott Pruitt, the head of the Environmental Protection Agency.