Tesla's Market Cap Dwarfs Detroit's 'Big Three'

After reporting a new delivery record for 2019 last Friday, Tesla’s shares rallied through the first trading days of 2020. The company’s share price is already up 12 percent this year, closing at an all-time high of $469.06 on Tuesday, the day of the official opening of its new Shanghai factory. At its current market capitalization of $84.6 billion, Tesla is not only far more valuable than Detroit’s Big Three. i.e. GM, Ford and Fiat Chrysler, currently are, but also the most valuable U.S. car company of all time. The electric car maker surpassed Ford’s 1999 market cap peak of $80.8 billion on Monday after beating GM and Chrysler’s highest valuations in the second half of 2019.

For decades, the U.S. has taken pride in the Big Three as the country’s largest automobile manufacturers. All headquartered in Detroit, the epicenter of the U.S. car industry, the Big Three (and the supplier industry behind them) provide hundreds of thousands of manufacturing jobs in the country and drive a significant portion of the U.S. economy. Is Tesla really ready to join that club?

Despite its impressive production ramp-up, the company still produces a fraction of the number of vehicles that GM, Ford and Chrysler produce. Rather than being based on past achievements or even current results, Tesla's valuation reflects the widespread belief that the future of cars is electric and that the company has enough of a headstart to eventually dominate that future.