Shares in gas-guzzling car makers from Volkswagen to General Motors are soaring as they talk up their plans for electric vehicles. While they are light years from catching up to the market value of Tesla, the gains suggest growing faith from investors that companies from Detroit to Deutschland can reinvent themselves.
Volkswagen, the world’s second-biggest car seller, has risen more than 50% in the stock market this year, according to FactSet data. GM stock has rallied 46%, while shares of Tokyo-based Toyota, the No. 1 car seller, have increased 9%. Tesla stock has gone the other direction, declining about 10% in 2021, the company still has a market capitalization roughly equal to that of GM, Toyota, Volkswagen, Daimler, and Ford combined.
Shares in beaten down sectors from airlines to energy have gained in recent months as vaccines go into millions of peoples’ arms, which investors hope will mark an end to the worst of the coronavirus pandemic. US stimulus spending is also providing extra thrust to global economic growth. But at the same time, financial markets are re-evaluating traditional car manufacturers, Michael Muders, a senior fund manager with Union Investment, said in the Wall Street Journal.
Automakers with roots in the early 20th century are touting their credentials for electric vehicles, batteries, and software, and investors appear to be buying into it. When asked last month whether US policy and legislation would be helpful for GM, CEO Mary Barra said she had already had multiple conversations with the Biden administration. “One of the things we’re really happy about is we are completely aligned in our belief in an all-electric future,” she said in a call with analysts. This week, Volkswagen chairman Herbert Diess said the company has as much as 60% of the electric vehicle market share in Europe.
Given the growing competition for electric cars, what explains Tesla’s immense market value? One reason could be irrational, bubbly hype. But some investors think Tesla is an altogether different company than the elder automakers. ARK Investment has argued that the company run by Elon Musk is really an autonomous-vehicle and electric car manufacturer rolled into one, which will set it up to the be the “robotaxi” service of the future—a multi-trillion dollar industry.