This is an incredible feat for America's youngest automaker.
Just a week after beating out Ford's valuation to become America's second-largest automaker in terms of market cap, Tesla briefly took charge and passed General Motors to claim the number one spot this week according to Bloomberg. During early trading hours on Monday, April 10th, Tesla's market value soared 3.7% to hit $51 billion, surpassing GM by a mere $3 million. The move is more of a symbol of Tesla's brand and the public's perception of it rather than its ability to move product, but it's a telling symbol at that.
Part of the reason it's so significant is because General Motors has just gotten done releasing the Chevy Bolt, a versatile electric car with a range of 238 miles that's priced competitively against the upcoming Tesla Model 3. Even with such an enticing car, investors (and enthusiasts in general) don't think it's as attractive a proposition as a $35,000 Tesla sedan. Part of the reason why could have something to do with the Model 3's looks compared to the Bolt's bulky aesthetic, but analysts think it has more to do with Tesla's brand. "Tesla engenders optimism, freedom, defiance, and a host of other emotions that, in our view, other companies cannot replicate," said Alexander Potter, an analyst at Piper Jaffray Cos.
In regards to the Bolt and the coming onslaught from competing automakers, Potter mentioned, "As they scramble to catch up, we think Tesla's competitors only make themselves appear more desperate." Though branding likely plays a large role in how investors see the company, Tesla's leaps and bounds also can be credited towards the company's most recent first quarter reports, which quelled concerns many investors had about Elon Musk's ability to deliver when it was reported that a record 25,000 cars had been delivered during the first three months of 2017. Tesla is unlikely to be able to keep this lead because sooner or later, the fact that both GM and Ford bring in much more money than the young automaker will dawn on investors.
For the time being, the outlook still looks good for Tesla. "The market cares more about the potential new market value of the other businesses Tesla is in than about real profits and cash flow," said David Whiston, an analyst at Morningstar Inc. "Right now there is nothing to slow Tesla's momentum. They could pass Honda, too." Barring a massive mishap during the Model 3's production launch, it's beginning to appear like Musk's big gamble is paying off.