Sunday, September 22, 2013

Is Tesla Worth 33% Of Ford's Market Capitalization?

Tesla provides an interesting story about the future of itself and the future of the auto industry.  It has a market capitalization of $22 billion which is 33% of Ford's market capitalization.  Ford sold 1.29 million vehicles in the US last year and Tesla sold only only 10, 500 cars which were primarily sold in California.  It receives substantial benefits from California's energy policies.  It is able to sell its carbon emission credits to other companies that amount to around $13,000 per car because it sells an all electric car that does not emit pollutants. 

Tesla is not only innovative in its engineering and design; it has also been innovative in its financial engineering.  Large Wall Street firms are among its shareholders and so are other auto companies.  Wall Street analysts have been bullish about Tesla and its stock price.  They keep raising their estimates as Tesla begins to produce lower priced electric vehicles that will serve a mass market.  They also admire Tesla's CEO who some regard as a mixture of Steve Jobs and Bill Gates.  They view Tesla as a high tech company more than they do as an auto company in a mature market.

Tesla faces many challenges as it attempts to expand its product line and its market outside of California.  Those challenges are described in the article but other car companies have taken notice and they are looking for ways to expand into the electric car market.

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