Tesla is churning out profits. It’s the number one in US car market cap at $84.6bn.
It’s disrupting auto. It’s changing world’s concepts of energy and outer space while at it. But is it producing enough cars to make a dent in US or non-US car manufacturing?
Biggest among the big 3
The company’s share price is already up 12% this year, closing at an all-time high of $469 on Tuesday, the day of the official opening of its new Shanghai factory. At its current market capitalization of $84.6 billion, Tesla is more valuable than Detroit’s Big Three while Ford’s 1999 market cap peak of $80.8 billion was also beaten on Monday.
Tesla’s shares continued to climb and traded up more than 4% on Wednesday, according to Business Insider.
The company had already surpassed the market values of General Motors, roughly $50 billion at Tuesday’s close, and Fiat Chrysler, at about $22 billion.
The latest surge in Tesla’s stock price began on Friday, when the company said it exceeded the low end of its guidance by delivering 367,500 vehicles in 2019, a record number and 50% more than in 2018.
Still, Tesla has yet to turn an annual profit, and a large part of its future success rests on how it performs overseas. On Tuesday, Musk said the company planned to export cars built in its newly opened Gigafactory in Shanghai, where production of Tesla Model 3s recently began.
Talking about production…
Despite its impressive production ramp-up, the company still produces a fraction of the number of vehicles that GM, Ford and Chrysler produce. There are 17.5 million US cars manufactured annually.
The Model 3 production already at 367,500 and its factory in China can produce up to 500,000 vehicles a year, according to Reuters.
But the company is nowhere near routinely selling some 3 million cars a year which is more than an eightfold increase in production, way beyond Tesla’s current or planned capacity. The best is when Musk himself has pledged there will be 1 million self-driving-enabled Teslas on the road in 2020.
ALSO, Tesla’s market cap does not have just Tesla automobiles in it, but they are the most visible aspect of its business.
For the future, Tesla does have the edge on the competition in that legacy automakers are unable to make the transition to EVs due to their razor-thin margins and they need to rid themselves from millions of dollars of gas/diesel manufacturing infrastructure to do so.
Still, while Tesla has overtaken US auto companies in market value, it is still dwarfed by non-US automakers. At the end of trading on Tuesday, Japan’s Toyota had a market value of roughly $232 billion, and Germany’s Volkswagen had a value of about $98 billion.