Sorry, GM: Tesla is now America's most highly valued automaker

April 10, 2017

Tesla has set a new record: this morning, it passed General Motors to become the most highly valued automaker in America.

That won't surprise anyone who's been watching Tesla's stock price in recent weeks. Shares have been on a mostly upward trajectory since last December--around the time that CEO Elon Musk announced that the company's semi-self-driving software, Autopilot, would allow for fully autonomous driving in 2017. 

The company sailed past Ford last week, and at the moment, Tesla shares are trading around $311, roughly $9 higher than they were at the closing bell on Friday. That brings the company's total value to $51 billion, or about $1.7 billion more than General Motors.

That said, Tesla has a long way to go if it wants to climb past the top foreign automakers. For reference, Toyota is the most highly valued car company in the world, with a total market capitalization of $172 billion. However, Tesla is very close to overtaking Honda, which is currently valued at $52 billion.

What does it mean?

Tesla is still a fairly new company with just a few years of auto manufacturing experience under its belt. (The first Tesla Roadster was delivered in 2008.)

In other words, like other companies, Tesla's stock valuation is based on its future prospects. Unlike its competitors, though, those prospects have less grounding in past performance and more to do with (a) Tesla's super-charismatic CEO, Elon Musk, and (b) the company's base of enthusiastic fans. 

That means that in order to keep its valuation high, Tesla will need to do a few things:

1. Keep Musk onboard. As an example of what can happen when a company fails to acknowledge the power of charisma, consider Apple's years of wandering in the wilderness without Steve Jobs at the helm of the company. Or, consider the flip side, exemplified by Faraday Future, whose CEO failed to wow anyone at this year's CES. (Though in fairness, the model that Jia Yueting was hawking for Faraday wasn't all that impressive.) 

Bottom line: Without a pleasing pitchman, it's hard for companies to sell even the best merchandise.

2. Continue to deliver amazing products. For the most part, Tesla owners love their cars. They're beautifully designed inside and out; they're full of jaw-dropping technology; and they're environmentally conscious. If future models fail to meet that high bar, Musk's outspokenness and his charisma can only compensate so much. Given Tesla's limited lineup, every model it makes needs to bowl people over. 

3. Continue to innovate. Consumers are beginning to understand that Tesla is more than a car company, it's part of a larger revolution that affects the way people live, work, and get around. Other automakers may follow that path, but Musk and Tesla are blazing it, and that's hugely attractive to the company's core audience.  

You'll note that delivering products on time and at affordable prices aren't on our must-do list. That's because, while those two things are important, Tesla has so far gotten along without them: production has been consistently delayed, and although the company's new Model 3 is expected to start in the mid-$30,000s, the Roadster, Model S, and Model X haven't been within most consumers' reach.

While those factors can frustrate would-be buyers, they don't necessarily diminish the appeal of the Tesla brand, which is what's helped drive the company's valuation to date. There's something to be said for being aspirational--just ask any fashion label. 

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