Tesla moves into China as shares double and market cap nears value of GM, Ford combined

Business

DETROIT – As Tesla CEO Elon Musk showed off his dance moves Tuesday to celebrate the launch of the Model Y in China, no such festivities were likely occurring in Detroit.

Shares of Tesla have roughly doubled in the last six months, giving the Silicon Valley automaker a market capitalization of roughly $84.4 billion as of 1:30 p.m. ET — less than $2 billion shy of General Motors and Ford Motor, combined.

That’s despite record profits and significant efforts by the Detroit automakers in recent years to restructure operations and cut costs, while Musk has unprofitably danced his way into Wall Street’s good graces.

Tesla’s stock surged by more than 16% in mid-day trading Tuesday to more than $468 per share after Musk’s presentation at the company’s new Gigafactory in Shanghai. That compares to GM at $35.03 per share with a market cap of roughly $50 billion and Ford at about $9.15 per share with a market cap of about $36.3 billion.

“They caught their competition in the U.S. just dead flat-footed,” Paul Holland, a general partner at Foundation Capital, said Tuesday regarding Tesla on CNBC’s Squawk Alley. “I don’t think it’s quite going to be the same in China … but nonetheless, terrific day for Tesla and well-deserved because they’ve innovated with a product that many of us love.”

The companies’ market caps, which measure the value of their outstanding equity, don’t tell the full story. Taking into account equity, debt and cash, the Detroit automakers have significantly higher total valuations. Ford would be worth the most with a total enterprise value of $154 billion, followed by GM at $132 billion, according to data compiled by Factset. Tesla’s total enterprise value, including debt and cash, is about $92 billion, according to the financial data provider.

Tesla’s celebration in China came as GM warned of continued challenges in China following a double-digit sales decline in 2019.

“We expect the market downturn to continue in 2020, and anticipate ongoing headwinds in our China business,” GM China President Matt Tsien said in a press release on Tuesday.

Ford has not released its 2019 sales for China, which was expected to have experienced its second-consecutive sales decline last year amid a weakening economy and trade war with the U.S.

– CNBC’s Michael Santoli contributed to this report.

Leave a Reply

Your email address will not be published. Required fields are marked *