Which is the bigger business - Ford or Tesla?

There are a number of ways to measure the size of a business and most of them agree that Ford is a much larger business. But recently, Tesla overtook Ford in the measure that perhaps matters most to investors - market capitalisation.

The table below shows the figures relating to four different measures of business size. Number of cars sold, employees and profits are all based on 2016 figures. Market capitalisation of course changes day by day but it was at the beginning of April that Tesla overtook Ford for the first time. 

This is a great opportunity to discuss with students why this might be the case. The obvious answer is that many investors see that Tesla is the future of automobiles and rate its prospects highly. They must be betting that Tesla will be able to deliver on its promise of low-cost electric vehicles and that future profits will significantly increase (they need to turn positive first). This is also likely to be somewhat dependent on other car businesses such as Ford being slow to match their technology.

And while there is no shortage of investors thinking that Tesla is highly over-valued, Elon Musk recently had this to say to those who are short-selling the stock!