As of Monday morning, Elon Musk’s Tesla Inc. hit a new milestone as it passed General Motors to become America’s most valuable automaker. The electric carmaker also surpassed Ford Motor Co. a week earlier, and next up is Honda Motor Co. At about $51 billion in market capitalization, Tesla rise to the top has little to do with the less than 80,000 vehicles it delivered last year and is more a reflection of investors betting on Tesla, and Musk, to dominate the market for electric cars.
Tesla’s popularity has grown significantly since it introduced its first electric vehicle, the Roadster, in 2008. As the company’s technology and design improved, and as the auto market began to adopt more electric cars, investors began seeing the potential in Elon Musk’s vision. While still unprofitable, Musk has pledged a massive increase in upcoming sales as the company prepares to release the Model 3 later this year, a much more affordable car to its predecessors.
Besides cash flow, what investors like to see in a business is opportunities for growth and diversification. Tesla not only manufactures electric vehicles, it is also makes batteries and solar energy systems. As the world becomes more energy efficient, Tesla will undoubtedly be at the forefront of technological movement. Value is not always linked to financial performance. In this case, Tesla’s value is a major bet on the future of cars and energy.