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DETROITThe Motor City has fallen to Silicon Valley.

Tesla Inc. TSLA +3.03% on Monday became the largest U.S. auto maker by market value,
overtaking General Motors Co. GM +1.07% a feat that would have seemed highly
improbable 13 years ago when the electric-car maker first began tinkering with the idea of
making a sports car.
Shares of Palo Alto, Calif.-based Tesla rose as high as $313.73 during Monday morning
trading, pushing the companys market capitalization to $51.17 billion. That eclipsed Detroit-
based GMs $51.1 billion, based on its highest point in early trading. Ford
Motor Co. F +0.89% , meanwhile, was valued at $45.1 billion.
The milestone underscores the seismic change occurring in the global automotive industry as
Silicon Valley pursues a vision for transportationincluding self-driving cars and vehicles-
on-demandthat could upend century-old players. Last weeks disappointing monthly
sales results by traditional auto makers served as a further example to investors concerned
that the profitable U.S. new-car market is plateauing.
Weve built a track record of strong financial performance, a GM spokeswoman said in an
email. Well stay focused on delivering outstanding results and making decisions to deploy
capital where it will generate the strongest returns, to enhance shareholder value.

Tesla declined to comment.

GM remains the largest auto maker in the U.S. by market share, making up 17.3% of the
sales last year, according to Autodata Corp. Tesla had a 0.2% share, which beat Ferrari and


Tesla: Have Investors Taken the Blue Pill? (April 6)

Tesla vs. Ford: Understanding Wall Streets Math (April 4)
Tesla Shares Surpass $300 Mark (April 4)
Tesla, on a Hot Streak, Passes Ford in Investor Value (April 3)
Why China Cant Get Enough of Elon Musk (April 1)

Whats fun about following this company now is that anything can happen, Chaim Siegel,
an analyst for, said in an email about Tesla that seems to mimic investor
sentiment even as the auto maker remains unprofitable and deeply in debt. The potential is
huge. The hopes are huge.

Even some of Teslas most optimistic followers are surprised at the recent run up in value.
Were pretty surprised by the recent run in Teslas share price to over $300 so quickly,
Adam Jonas, an analyst for Morgan Stanley, wrote in a note to investors as Teslas market
cap neared GMs. He has been targeting a $305 price for Tesla. Such is the power of
technical factors over fundamental drivers.
Tesla shares have been on roll this year, rising more than 40%, a run that last week had Chief
Executive Elon Musks car company surpass Ford Motor Co. as the second-largest car
company. The exuberance comes even as Mr. Musk faces huge challenges in accomplishing
all that he is claiming to do, including making 500,000 vehicles next year after building just
84,000 last year and creating software that would enable a vehicle to drive itself.
Its indicative of the market wanting to pay for potential, including into markets that dont
exist yet in any large size such as EVs, home energy generation and storage, rather than
profits and cash flow today that the large auto makers generate, said David Whiston, an
analyst for Morningstar Research.
Elon Musk, CEO of Tesla, talks about the Model X car at the company's headquarters in September
Mr. Musk, who has struggled to bring out new products before, faces the daunting challenge
of later this year rolling out the $35,000 Model 3 sedan, the linchpin in his plans to take the
company into the mainstream from the rarefied air of selling luxury vehicles.
His acquisition of SolarCity Corp. late last year and removal of the word Motors from the
companys official name is part of a broader vision of being able to offer solar panels to
generate energy and batteries to store that power at home or the officeall for the benefit of
the vehicles being sold. He has also begun shipping vehicles equipped with the hardware he
says is needed to make them fully self-driving once the software is completed, aiming to
demonstrate the prowess by years end.
It is a vision that got a strong endorsement late last month with the revelation that Chinese
tech giant Tencent Holdings Ltd. , best known for Chinas largest social network, WeChat,
had acquired a 5% stake in Tesla.
The sooner investors view Tesla as a transportation/infrastructure company rather than just a
car company, the more we believe the industry events to come over the next 12 to 18 months
will make sense, Mr. Jonas wrote.

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Tesla has overtaken Ford in investor value, despite being unprofitable and deeply indebted. WSJ Detroit bureau
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Investors continued to push Tesla shares higher last week following the announcement of
a record quarter of vehicle sales. Meanwhile, GM reported a modest U.S. sales gain for
March, lifted by truck demand, and said Chief Executive Mary Barra earned $22.6 million in
2016, a decline of 21% from 2015 when she was awarded a sizable retention package. Ms.
Barra, at the helm since 2014, has said her goal is to make GM the most valued auto maker in
the world.
For GM, this day is particularly painful. The Detroit auto maker, which sold 10 million
vehicles last year globally, has been rushing to develop its own self-driving
technology, acquiring Cruise Automation last year in a deal that could be worth $1 billion,
and investing in ride-hailing service Lyft.
Ms. Barras predecessor, Dan Akerson, a former telecommunications executive, was
concerned about the potential of Tesla, setting up a team to study how Tesla could threaten
GM and challenging his senior executives to war-game-like scenarios.

GM has been especially aggressive in recent years in its attempt to thwart Tesla, pushing
legislation in states in an attempt to block the companys strategy of selling directly to
customers instead of using franchised dealers like the rest of the auto industry has done for

In preparing the new Chevrolet Bolt all-electric small car, seen by some as GMs answer to
the Model 3, Ms. Barra took a veiled shot at Tesla in January 2016 at CES, the high-profile
annual consumer electronics show in Las Vegas, saying GMs dealer network gave it a
competitive edge. Teslas belief in having the ability to control its own stores is held as
tightly as a religion among senior leaders, worth fighting protracted battles in states across
the country.

GMs vision of a world with self-driving cars dates back to concepts it introduced at the
World Fair in the 1930s, but innovation took a back seat among the most recent generation as
leaders fought to keep the company from bankruptcy.

Ultimately, GMs crushing debt load and the 2007-09 recession led to what was then
unthinkable generations earlier: GMs U.S. government-backed bankruptcy reorganization in

Financially, the company has roared back, reporting record profits and developing some of its
best vehicles in a generation. But investors have largely yawned. GM shares closed Friday at
$33.71, compared with its postbankruptcy initial public offering price of $33 in 2010.

Its absolutely mind boggling that were even discussing GM and Tesla reaching a parallel,
said Dave Sullivan, an industry analyst with AutoPacific. Its not as if they are sitting on
some sort of blockbuster drug that isnt available in generic form. The wide rollout of electric
vehicles by Jaguar, Daimler, BMW , and Audi is right around the corner.