Tesla Becomes the Highest Valued Carmaker in America

Tesla, a manufacturer of electric cars, briefly became America’s most valued auto manufacturer. The company, headed by serial entrepreneur Elon Musk, reached a valuation of $50.9 billion. This edged it slightly higher than General Motors, valued at $64 million less. The manufacturer, which delivered 76,000 cars globally last year, has made total losses of $1.9 billion in the past three years. In contrast, General Motors posted total sales of 9.6 million and a profit of $9.43 billion in 2016 alone. While the valuation seems extreme for such a small firm, investors are undoubtedly looking to the future. Tesla is launching the cheaper mass-market Model 3 this year and aims to reach one million vehicle deliveries by 2020.

Positively for Tesla, there is a growing backlash against diesel. With growing clamour over air quality in cities, Tesla, and their zero-emissions vehicles, may be poised to take full advantage of the changing landscape as public demand shifts. Regulators in Paris, Mexico City, Madrid, and Athens have vowed to ban diesel by 2025, a shift to zero-emission vehicles is on the fast approaching horizon. Parallels may be drawn with Uber, the ride-hailing company. Uber lost $2.8 billion in 2016, however net revenue grew rapidly as 2016 progressed. With a valuation of $69 billion, investors, just as with Tesla, simply want a piece of a fast-growing company and are overlooking immediate losses to bet big on future returns.

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