Tesla Motors moved to within striking distance of becoming the largest US automaker by market capitalization

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Tesla Motors has moved to within striking distance of becoming the largest US automaker by market capitalization, a testament to Wall Street’s growing ardor for Silicon Valley at Detroit’s expense.

The company officially surpassed number two US carmaker Ford on Monday after reporting better-than-expected first quarter sales during the same news cycle, in which general US auto sales disappointed for March, reports BSS.

Shares of Tesla rose 1.74 percent at closing Tuesday to $303.70 per share, lifting its market capitalization to $49.4 billion, $4 billion more than Ford’s and around $1.9 billion below that of top US automaker General Motors.

Signage is displayed outside of Tesla Motors before the Tesla Energy Powerwall Home Battery event in Hawthorne, California

Tesla still makes and sells a fraction of the cars of those established giants, meaning that its rise on Wall Street is due to expectations that its pioneering work on electric cars will ultimately carry the day.

Tesla’s most important offering on the mass sales front is the Model 3, which is still under development and aimed at the middle market with a far more affordable price than Tesla’s first two autos, the Model S and Model X.

Founder Elon Musk celebrated the company’s surging stock price on Twitter, mocking skeptics with the barb “Stormy weather in Shortville,” a reference to “short sellers” who have lost money betting the stock would fall.

Still, the significance of Tesla’s latest surge on Wall Street should not be exaggerated, JPMorgan Chase suggested in an investor note Tuesday.

Tesla’s “modestly stronger trend to Model S & X deliveries does not necessarily read across directly to a smoother launch for the Model 3, which we believe drives valuation for that stock,” it said.

Other questions surrounding the company include scrutiny of its autopilot technology and the wisdom of its 2016 acquisition of SolarCity, panned by many Wall Street analysts when it was first announced.

FROWNING ON DETROIT

Tesla Model 3 is on track to begin production in July, with output gradually ramping up to what executives say will be 5,000 vehicles weekly by the end of this year.

The Model 3 is priced at a moderate $35,000 in the United States. The company says it expects to reach 500,000 cars per year in 2018. However, some are skeptical about that timeframe.

Morgan Stanley said in a note last month that it does not expect a volume of 500,000 cars per year until 2024. It confirmed its “overweight rating” for Tesla on Monday with a target of $305 in a note highlighting Tesla’s pioneering safety technology features.

Tesla’s rise is part of a broader shakeout in American industry led by Silicon Valley that has shifted Detroit’s vernacular to speak in terms of “mobility” beyond cars and greater priority for autonomous features.

Ford has ramped up its technology efforts and vowed to produce a fully autonomous car in 2021. GM, which has also pursued autonomous driving technology, has launched a mid-priced electric car, the Chevrolet Bolt. It sells for $30,000, including US tax subsidies. Still, those cars are struggling to win plaudits from investors.

Last week, activist investor David Einhorn proposed the creation of two classes of GM stock for better valuation. However, the company has fought that plan, calling it untested and risky.

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