Tesla Becomes Most Valuable US Car Maker, Edges Out General Motors

SAN FRANCISCO – For the first time in the era of the modern automobile, the most valuable US car maker is not based in Detroit.

Silicon Valley’s Tesla Inc overtook General Motors on Monday to become the US car maker with the largest market capitalisation as the century-old automobile industry increases its reliance on software and cutting-edge energy technology.

That milestone is likely to be on the minds of Tesla chief executive Elon Musk and GM chief executive Mary Barra as they and other CEOs visit the White House on Tuesday to discuss tax reform and infrastructure with President Donald Trump.

Helped by an analyst’s recommendation, Tesla rose 3.26% to a record high of $312.39 on Monday. Its market value of $50.887 billion exceeded GM’s by about $1 million.

Over the past month, the luxury electric car maker has surged 35% as investors bet that Musk will revolutionise the automobile and energy industries.

That compares to a declining share performance by GM in recent years that recently led billionaire investor David Einhorn to propose splitting the stock into two classes to help boost its price.

Tesla’s market capitalisation is now equivalent to $102,000 for every car it plans to make in 2018, or $667,000 per car sold last year. By comparison, GM’s market capitalisation is equivalent to $5,000 per car it sold in 2016.

The Palo Alto, California company is rushing to launch its mass-market Model 3 sedan in the second half of 2017 and quickly ramp up its factory to reach a production target of 500,000 cars per year in 2018. Last year it sold 76,230, missing its target of at least 80,000 vehicles. By comparison, GM sold 10 million cars and Ford sold 6.7 million.

With its stock down nearly 20% since 2013, GM has scaled back operations outside the United States while pushing to improve its profitability. It announced in March it would sell its European operations.

Reflecting Wall Street’s worries, GM’s stock trades at 6 times its expected earnings, the lowest multiple among companies in the S&P 500.

Proponents believe Tesla, which is not profitable, argue its stock price is justified based on long-term expectations for Tesla’s growth.

They also point to opportunities from Tesla’s acquisition last year of money-losing solar panel installer SolarCity and Tesla’s Nevada battery cell plant aimed at driving down manufacturing costs.

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