New Valuation Thrusts Tesla Past GM

In a move that has stunned automotive industry experts, Tesla received a new market capitalization estimate that pushed its value above that of GM. The company, headed by serial entrepreneur Elon Musk has received lots of positive buzz as of late for record sales and production in Q1 2017. Still, investment analysts are shying away from suggesting that share prices will rise to match the growing popularity of electric cars. The new estimate places Tesla at the sixth most valuable car company globally, and as the top American carmaker.

Tesla's value now surpasses that of GM and Ford.

Tesla Passes GM without Profitability

The main point of contention rests on Tesla’s profitability. Currently, the company has only made money in two quarters over a period of nearly fifteen years. Even with selling 25,000 cars last quarter, the company is expected to lose millions. Experts say that the company needs to make and sell 500 thousand cars each year while maintaining a low cost margin in order to become profitable.

Batteries Drain Tesla Profits

Tesla currently is producing about 25 percent fewer cars each month than even its current goal of 30,000 cars a month. Additionally, while the battery costs have been falling steadily, the technology still adds a significant chunk to the cost of the car. After a brief experiment with installing the same battery into multiple models, and then setting performance through software, the company has switched to a higher power battery, with a slightly higher price tag. However, the true key to Tesla becoming profitable will be reliable solar powered batteries, which they are developing.

Tesla Banks on Clean Energy

Of course, some trading experts support the new valuation, based on expected future growth. Undoubtedly, the future for transportation will eventually turn away from fossil fuels in favor of renewable energy. After the death of A Better Place, Tesla is the strongest contender in the field. Ultimately, Tesla’s new value is based on what no one is talking about: the company’s standing as an energy technology company. Tesla is quietly branching out into solar energy for both businesses and homes, and wants to provide clean energy for every facet of life.

Is the Tesla Valuation a Scam?

Still, it’s difficult to match Tesla’s 25 percent share increase since the beginning of March with future earnings estimates that take into account the next ten years of growth. Can Tesla’s 80,000 units of sales for 2016 truly compete with GM? America’s former top automaker old nearly 10 million vehicles while earning $9 billion in profit. The Chief of the largest network of auto dealerships referred to the stock valuation as a Ponzi scheme, in which today’s investors will profit, leaving future traders to pay the piper when the bubble bursts.

Model 3 Brings Electric Cars to the General Public

Car experts have given a few short term goals which would signify that Tesla has earned the new ranking. Musk has proposed a new car which will be less than half of the price tag of the current sedan. The new Model 3’s base price is well within the budget of most electric car enthusiasts. The current production date is set for this July. This date could prove whether or not Tesla can break into the general consumer market.

Tesla Sees Sunny Future in SolarCity

Tesla will also need to increase production on the solar tiles created by its subsidiary SolarCity. The company has begun accepting orders, and plans on delivery by the end of the year.  Tesla hopes to capitalize on the growing solar energy market. This would justify the $2.6 billion purchase of SolarCity last year. Oil prices are falling despite OPEC’s attempts at cutting capacity. Still, renewable energy needs to make strong moves to gain market share. The SolarCity tiles are durable and attractive. This makes them a perfect addition to the residential construction market, but only if production can be sped up significantly.

How Does the Tesla Valuation Affect Trading?

Stock prices for Tesla have actually dropped following the valuation update. This is because even those who have backed the company are concerned that the price is currently a little high. GM stock faces a risk of going down, as does Ford stock, which Tesla surpassed in value earlier this month. Honda is also apprehensive, as they are currently hanging on to fifth place by a mere $1 billion. Additionally, greater competition from electric cars and solar power could lead to a continued price spiral downward for oil.