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Tesla's Success Forcing Other Carmakers to Up Their Electric Car Game

Daniel Gross sees GM's concerns about Tesla as a harbinger of what is happening across the entire auto industry as carmakers try to come up with similarly successful electric car strategies.

Published: 25-Sep-2013

Cars can’t fly. But Tesla Motors, the electric sports car manufacturer, continues to defy gravity. Its stock has risen six-fold in the past year, giving it a market capitalization of $22 billion. That’s stunning, especially given that Tesla sells only about 2,000 cars per month and last quarter reported a $70 million profit.

By contrast, GM, which sold more than 275,000 cars in August and earned $1.2 billion in the most recent quarter, has a market capitalization $51.8 billion—about 2.5 times that of Tesla. And Ford, which sold 221,270 cars in August, more than 100 times Tesla’s total, and notched a $2.6 billion profit in the most recent quarter and is valued at $68 billion, about three times what Tesla is worth. Put another way, these companies have more in profits each quarter than Tesla has in revenues.

The astronomical valuation of Tesla could be a sign that investors are shrewdly predicting the future. The stock market, after all, is famously a futures market. Or it could be a sign of the sort of exuberance that frequently infects American investors. Hopped up on momentum and dreams, investors often bid up shares of companies beyond all reasonable valuation.

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