Tesla Is Still Worth More Than GM
Despite a sell-off in Tesla Inc.’s (NASDAQ: TSLA) stock due to the erratic behavior of CEO Elon Musk, SEC scrutiny of his public statements, rumored turmoil among board members and risks that it can’t hit production targets, the electric car company’s market value is still higher than that of General Motors Co. (NYSE: GM). GM sells about 10 million cars a year. Tesla delivered slightly more than 40,000 last quarter.
The disconnect between the values of the two companies becomes harder to understand by the day. GM’s U.S. sales have remained fairly stable. It holds 18% of the total car and light truck sales in its home market, which makes it the leader. GM and its joint venture partners sell over 4 million units a year in China, the world’s largest car market, which by many measures makes it the largest manufacturer in that country.
Among the points in Tesla’s favor is its growth rate. Revenue in the second quarter was $4.0 billion, up from $2.8 billion in the same period a year ago. Tesla also can claim to be the leading electric car company in the world. Alternatively, GM is in a pack of industry giants that would like to have Tesla’s sales and brand but don’t. If Tesla can continue to grow according to its forecasts, it will sell 500,000 electric cars in 2020, which will put it clearly in the industry’s lead condition.
GM’s primary foray into electric cars has been a failure, The Chevy Bolt sales were 7,858 in the first half of 2018, up only 3.5%. Its position in the sector will be difficult to change. GM and every major car manufacturer in the world, plus a small army of tech companies, are trying to get traction in the electric car market.
In GM’s favor, the electric car market may not grow as fast as predicted. There is no reliable evidence that Tesla can sell 500,000 cars within two years. Part of this may be a production problem. Another part may be that the demand for clean diesel and hybrids will satisfy much of the need for “green vehicles.” The future of the electric car business will be cloudy for at least a few years.
GM’s revenue, which stands at about $145 billion a year, does not show any signs of attrition due to demand for electric cars. Tesla is in trouble, not just due to product demand and quality, but rather management and financial trouble. Some people think Tesla’s market cap leadership is outlandish. The next few months may prove whether that is so.