(Recasts to include detail on GM)
By Noel Randewich
SAN FRANCISCO, April 10 For the first time in
the era of the modern automobile, the most valuable U.S. car
maker is not based in Detroit.
Silicon Valley's Tesla Inc overtook General Motors
on Monday to become the U.S. car maker with the largest
market capitalization as the century-old automobile industry
increases its reliance on software and cutting-edge energy
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
percent 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 percent as investors bet that Musk will revolutionize
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 capitalization 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 capitalization 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 percent 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
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
After driving a Tesla for seven months, Piper Jaffray
analyst Alexander Potter on Monday upgraded the stock to
"overweight" from "neutral", describing Tesla's products as
"Tesla isn't just another company. 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," Potter wrote in a report.
Skeptics believe Tesla's growth targets are unrealistic and
that the company risks being overtaken by GM, Ford and other
deep-pocketed manufacturers ramping up their own
Its market capitalization remains smaller than Japan's
Toyota Motor Corp, at $173 billion.
Tesla's rich valuation has made it a target of short
sellers, who so far in 2017 have suffered over $2 billion in
paper losses as the stock rallied.
Jeffrey Gundlach, who oversees over $105 billion in assets
at Los Angeles-based DoubleLine Capital, told Reuters last week:
"As a car company alone, Tesla is crazy high valuation. As a
battery company - one that expands and innovates substantially -
maybe the valuation can work."
(Editing by Alistair Bell and Cynthia Osterman)