What Tesla's Recent Stock Surge Means For The Future Of Electric Cars

Tesla is on an upswing. What does it mean for the technology and the industry?

6Apr

Tesla fixed its Model 3 production woes recently, to the tune of a 40% increase to approximately 45,000 vehicles, and a stock increase of 5%, close to $270.

This comes on the heels of plenty criticism and speculation that the company couldn't fulfill its production backlog and vehicle quality. CEO Elon Musk was the antithesis of doubt Tuesday when company's shares skyrocketed, as he declared that his Model 3 electric vehicle will potentially 'exceed even that of Ford and the Model T.'

While the company has been valued at $45 billion, comparable to that of the Ford Motor company, lulls in production kept the company from translating this value into earnings. While Ford sold close to 7 million cars in 2017, bringing in upwards of $8 billion, Tesla sold 103,000, losing more than $2 billion.

The fact that the companies are valued nearly the same, despite drastically different performance, shows that experts still believe the future belongs to Tesla.

Tuesday's success provided a much-needed breather for the company, as Musk had done to Twitter the day before stating that the car business is 'hell'. The company will need to keep improving its production times, while maintaining quality, in order to exceed the output and impact of Ford's Model T, as Musk proclaimed.

Investors stress patience and playing the long-game with Tesla. Through scrutiny and tumult, the company's shares are still up 500% since 2013. What's even more revealing is Tesla's market cap is greater than Ford's, further illustrating that Tesla is the long play.

We could be witnessing the genesis of a shift, as Tesla's stock performance has improved by 35% in the last year, while Ford has decreased by 15%.

The same day that Tesla enjoyed a stock surge and declared that the Model 3 will surpass Ford's legendary Model T, Ford was delivered a blow, as its Ford Escape received a 'poor' safety rating. This is a serious hit since the Ford Escape is one of the most popular SUVs in the country and a huge seller for Ford.

The true test of where these companies are headed lies with Ford's ability to adapt to electric vehicle production. Ford plans to invest $5 billion toward electric cars by the year 2022 to compete with Tesla and the other electric car giants.

Investors should stay aware of developments with both companies while mapping out their strategy. 

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