Yesterday, Tesla became the most valuable US car maker, slightly edging out GM. Obviously this is based on their stock values and their market capitalization. GM sells way more cars each year compared to Tesla. But Teslas’ stock value has surged in the last month by 35%. Investors appear to be betting on the upcoming Tesla Model 3 and hoping that it will take over the market.
I saw some figures on Yahoo Fiance that show why many people say Tesla stock is overpriced. For every one car sold in 2016 Telsa has $667,000 of market capitalization. In comparison, GMs is only $5,000. Of course each Tesla vehicle sells for much more than the average GM vehicle but it is still a huge difference. If Tesla can meet their 2018 sales target their market capitalization per car would drop dramatically to $102,000 per car. But that is a big if and it is the whole point. Can they actually meet their sales target.
Growth stocks in general are built on hope. Many times you look at the companies current value and there is no way to justify purchasing their stock. But if you believe that the company can grow as they’ve predicted, your investment is based off the hope that those predictions become a reality. What is certain is that Tesla has already revolutionized the electric vehicle industry. They’ve proven that you can build a battery powered vehicle that is not only desirable but also practical. Before they came along, driving over 200 miles in an electric vehicle was unheard of.
Now with the Tesla Model 3 they are trying to prove that it can be somewhat affordable too. Maybe someday on par and as affordable as a gas powered vehicle. This is after all the holy grail of the industry. Having a vehicle that costs the same amount and get the same amount of range. Who knows if it will happen but in the pursuit of these goals, the consumer will benefit no matter what.
The story of Tesla is in essence the story of capitalism. We’ve already seen other manufacture trying to respond to the products that Tesla has created. Case in point is the Chevy Bolt. This trend will continue as manufactures invent better products and they deliver them lower prices due. The Model 3 is supposed to start shipping later this year and that will be our first glimpse at how successful Tesla will be at creating their vision. I for one am rooting them on. I hope this product launch is successful and I can’t wait to see what they come up with next. Like I said, at the end of the day the consumer will win, no matter what.