Automotive News: In Just 3 Days, GM Sells More Vehicles Than Tesla Did In All Of 2016
In some months in 2016, the Chevrolet Volt alone outsold Tesla’s whole lineup of vehicles.
Or, to take a different perspective on it, Automotive News points out:
“Every three days, General Motors sells more vehicles than Tesla Inc. sold in all of 2016. GM earns nearly $1 billion a month, while Tesla has lost money every year of its existence.”
How is it then that Tesla’s market capitalization shot higher than General Motors? Well, it seems market cap for Tesla is based largely on future expectations, whereas General Motors is mostly a constant and isn’t expect to really shake things up in the near future.
But here’s what’s lost in all this, per Automotive News:
“Unless you’re being bought out or borrowing money, market cap effectively has little bearing on a business.”
Alan Batey, General Motors’ North America president, commented on Tesla surpassing GM and on value of the automaker:
“I definitely believe we’re undervalued. I’m not going to lie to you and say I like it. Of course I don’t.”
Tesla’s cash burn continues though and that will have to stop at some point soon. John Murphy, an analyst with Bank of America Merrill Lynch, commented:
“At some point, you’ve got to turn cash-flow positive. They’re doing cool stuff, but the money’s got to come in at some point.”
These two metrics, outlined by Automotive News, show the differences between GM and Tesla:
• Cash flow: Tesla burned through $448 million in cash during the fourth quarter of last year. GM’s automotive operating cash flow in the same period was $4.3 billion positive.
• ROIC: Return on invested capital measures a company’s cash flow in comparison to the capital put into it. Tesla has no net cash flow, so its ROIC was minus 19 percent in the fourth quarter of 2016. GM’s was a record 29 percent.
So clearly Tesla’s valuation is based up expectations, meaning Tesla must deliver on its promises.
Source: Automotive News