Good morning and welcome back to Speed Lines, The Drive’s morning roundup of what matters in the world of cars and transportation. On the docket this morning: Tesla’s crazy valuation, Hyundai and Kia plan their own EV blitz, and General Motors has to transfer workers over COVID-19 shortages.
One of the few bright spots in the coronavirus-beset auto industry in 2020 is Tesla’s incomprehensibly skyrocketing stock price. As legacy automakers struggle to get Wall Street to notice them as they dip their toes into the electric vehicle game, Tesla has managed two solid quarters so far-and a valuation that’s risen so far it has made the company worth more than Volkswagen, GM, Honda, Fiat Chrysler and Ford combined.
In fact, as The Wall Street Journal reports, Tesla is now, somehow, bigger than several financial titans, retail chains and health care providers:
How big has Tesla gotten? Tesla’s recent surge puts its market value of roughly $286 billion above that of Home Depot Inc., Intel Corp. and UnitedHealth Group Inc. The electric-car maker is also bigger than Bank of America Corp. and American Express Co. combined, according to FactSet data.
[…] If it were in the S&P 500, it would be the 13th-biggest company in the index, slightly behind JPMorgan Chase & Co., whose market value is about $298 billion. During the day, it was on track to close in the top 10 U.S. companies by market capitalization for the first time on record. It ended up losing $47.59, or 3.1% to $1497.06.
What’s driving this? Several things. Stock prices, obviously, are bets on the future, and investors are going big on electric vehicles. For now and probably for the foreseeable future, Tesla’s the clear leader in that world. Investors are also extra bullish over Tesla’s earnings report due out next week, three consecutive profitable quarters and possible inclusion in the S&P 500 soon. It’s priced at 6,348 times its 2019 earnings.
And as CNN notes, it could equate to an even bigger payout for CEO Elon Musk:
Even more massive paydays could lie ahead. For Musk to get to the third block of stock options, Tesla must maintain a market value above $200 billion over the course of six months and hit the next round of operational goals over the course of four consecutive quarters — either revenue topping $30 billion or $3 billion in earnings, before interest, taxes and depreciation.
But I get the cognitive dissonance at work here. How can you not? Tesla is a company that still struggles with production issues and has yet to turn an annual profit. It may have a bigger market capitalization than Toyota or VW now, but it’s still a bit player in terms of production. And now it’s “bigger” than some established firms amid a truly dismal economy when the only people who seem optimistic about anything are Wall Street investors.
There’s been talk of a tech stock bubble for years now. Perhaps the next big bubble is EV stocks, especially if the startups and smaller players can’t get it together and become stable, profitable car companies. But electrification is absolutely the way the auto industry is going. And investors have made clear they hope to cash in hard when as that happens.
Of course, Tesla and the startups aren’t alone in the EV arena. Every automaker is pushing hard there, even if some strategies are more clear than others. GM and VW are two of the most ambitious to date.
You may soon be able to count Hyundai Motor Group in that crowd. The conglomerate’s executive vice chairman, Euisun Chung, said Tuesday that the goal is now to sell 1 million electric vehicles in 2025-and that’s in, and not by-as it seeks 10 percent of global EV market share.
According to Reuters, that comes with a big push of support by the South Korean government as well:
Hyundai Motor plans to launch a next-generation electric vehicle with a driving range of 280 miles per charge and charging time of 20 minutes or less, Chung said in a televised video message. It aims to export 1,600 hydrogen-powered trucks to Europe by 2025, and develop a new system that doubles battery life at half the price, he said.
Chung’s statement came as South Korea outlined a pla…