Autos

Tesla's Market Cap Surges to 4 Times GM's

Douglas A. McIntyre

Tesla Inc. (NASDAQ: TSLA) has a market cap of $129 billion, despite a car industry that is crippled worldwide and comments by founder Elon Musk that have troubled investors. Nevertheless, Tesla’s market cap is 4.3 times that of General Motors Corp. (NYSE: GM), which is currently $30 billion. Over the past four weeks, confidence in the electric car company has improved, while traditional manufacturers are considered to be in deep trouble.

Tesla’s stock has risen 8% in the past three months. GM stock is down 37%. Despite gasoline prices that have fallen to a 30-year low, just above $1 for a gallon of regular nationwide, people have not driven much or bought new cars. There is suspicion that, as people become consumers again, they will hold their cars longer so they can save money.

Among GM’s perceived weaknesses is the massive cost of its infrastructure of factories and its 164,000 workers, many of whom probably will be laid off. GM has started to rebalance its balance sheet, via extending the maturity of $6 billion in debt. It also ended its dividend payments.

Musk may benefit from the fact that Tesla buyers are affluent. The price of its cars ranges from $40,000 to well above $100,000.

Tesla posted strong earnings for the first quarter and it made an unexpected profit. The question no longer is whether it can survive long term.

Musk managed to knock down Tesla’s value recently when he said his stock was overpriced. While that may be true, the perception is that it is better off than any other American auto-manufacturing giant.