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Tesla's market cap overtakes Ford after shares rise to record

Published: 04:44 04 Apr 2017 EDT

Tesla
Tesla is riding close behind General Motors for the biggest market cap

Tesla Inc (NASDAQ:TSLA) has overtaken Ford to become the second largest US car maker by market capitalisation after its shares surged on a well-received first quarter trading update.

The electric-car manufacturer’s shares jumped 7.3% to close at a record US$298.52 in the US, putting its market capitalisation at US$48.7bn, compared to Ford’s US$44.6bn.

Tesla is now just a few billion behind General Motors’ US$50.9mln market capitalisation.

A record 25,000 vehicles

The rally in Tesla’s shares came after the company said it delivered a record 25,000 vehicles in the first quarter, up 65% on the same period a year earlier.

It marked a strong recovery from the 9% drop in deliveries in the fourth quarter, affected by output troubles.

Tesla also said it was on track to meet its guidance of 47,000 to 50,000 deliveries in the first half.

The company plans to produce 5,000 cars a week later this year after output of the new Model 3 begins in July.

Model 3 expected to boost Tesla sales.. 

The Model 3 is also expected to boost Tesla’s sales volumes as it will be more affordable than its other vehicles. At US$35,000, it will cost about half as much as the cheapest Model S, which is priced at more than US$70,000.

Investors believe Tesla stands to benefit from the shift towards electric vehicles and the advent of automated driving while GM and Ford have failed to convince the market they are the forefront of new technology.

"Tesla now boasts the fastest production car in the world, moving from 0-60 mph in 2.5 seconds and its battery range for its latest S model has also reached an impressive 265 miles in just one charge," said Jordan Hiscott, chief trader at Ayondo Markets.

"If the technology keeps improving, we’re likely to see Tesla stock rise even higher in the coming years.”

In an effort to address growing demand for electric cars, GM recently offloaded a bulk of its unprofitable European operations to focus on investing in technology.

Ford accelerating move towards electric..

Ford has also been adding jobs to accelerate its move towards electric and autonomous vehicles.

The two automakers have also bought technology companies to improve their in-house engineering expertise.

While Tesla's growing market cap means it is closer to taking over as the No.1 US car marker, it has few miles to travel before it reaches the same level of sales as it competitors. 

Data compiled by auto industry publication WardsAuto showed yesterday that GM sold 256,000 vehicles in March while Ford sold 236,000.

Tesla's sales for the same period were just 4,000 but its prospects for future growth have impressed investors. It is also considered a tech start-up company rather than an automaker.

"Technology has a huge part to play in this, with the investment from Tesla founder Elon Musk in the battery development factory Gigafactories clearly paying dividends in terms of the improvement in duration and overall power of its vehicles," said Hiscott.

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