Could Tesla Motors Soon be the Fifth Biggest Automaker in the World by Market Cap?

If things go well for the upstart EV maker, Tesla Motors could soon bag a prestigious position as being the fifth biggest carmaker in the world in terms of market capitalization.

Two days ago, the Model 3 maker began playing ‘market cap tag’ with the United States’ biggest automaker, General Motors. If its valuation holds, and climbs incrementally, it could soon overtake both GM and Honda to join the ranks of the Top 5 alongside Toyota, Daimler, Volkswagen and BMW.

Tesla Motors

Tesla’s valuation of around $51 billion already allowed it to beat Ford Motor Company and start playing hide and go seek with GM, and Honda is only $53 billion at this point. A little push from Tesla investors and the company could well go into the world’s Top 5 most valuable car companies. Valuation has dropped since then, but history has a way of repeating itself. Worst-case scenario is that Tesla has proved its ability to play with the big boys as far as valuation is concerned – a huge validation for electric vehicle technology in itself.

Not surprisingly, several people have lashed out against Tesla’s high valuation because of its current sales volumes and operating losses. GM ships about 10 million cars annually against Tesla’s 80,000 or so, per 2016 figures. But that’s not the only point of contention: GM’s outlook on income this year is $9 billion; Ford’s adjusted profits are expected at $6.3 billion; Tesla, on the other hand, is expected to do what it usually does – lose money; this year, to the tune of nearly $1 billion.

Ford’s president of the Americas, Joe Hinrichs, doesn’t quite agree with Tesla’s valuation:

“Cash flow should determine what the value of a company is and our cash flow has been pretty good lately. At the end of the day, we run the business to serve our customers.”

Notwithstanding the fact that GM filed for a government-back bankruptcy less than a decade ago, no business runs to serve its customers. That’s rubbish. Businesses are necessarily run “for-profit”, and with the sole interest of its stakeholders in mind. Focus on customers is an incidental – a vehicle to get you to higher levels of sales and profitability, if you will.

For the record, I am not long Tesla and I’m not short GM. I own neither of those stocks. But I will stand up for a company that is trying its best to revolutionize the automobile industry. For a profit yes, but in a more sustainable way than almost every other carmaker out there that is currently focused on selling as many petrol and diesel vehicles as possible.

But even the Ford executive’s words didn’t have as much a hidden agenda as a recent report from Edmunds, ominously titled: “elimination of federal tax credits likely to kill U.S. EV market.”

Who says things like that without adequate proof or validation, neither of which the report actually had, as astutely and elaborately pointed out by The Drive?

Tesla Motors is not a perfect company – not even close. But the data to back up the fact that the entire EV market will collapse when tax rebates disappear makes it an irresponsible document at best.

Twenty years from now, when Tesla is where Toyota is right now, a lot of people are going to be eating their words. As long as Tesla carefully treads the dangerous world that is the automobile industry, they’re going to be on track to selling millions of EVs a year over the next decade or two.

Granted, something cataclysmic could happen and send Tesla into an uncontrollable financial tailspin, wiping out all its work. But the company has a resilient group of stakeholders behind it, and the momentum has been set for EVs on the strength of Musk’s vision backed by this group. Tesla isn’t going down that easily.

Meanwhile, its mere presence in the automobile arena will assuredly attract all kinds of attacks and criticisms for its work in the EV space. Fortunately, the more vehement and cancerous of these detractors will fall away one by one as the inevitable move towards alternative energy solutions chips away at the ICE auto industry.

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