Tesla Inc. doesn’t yet make a profit peddling its electric cars, and its sales are a tiny fraction of those tallied by its Detroit rivals. But that’s not the point to investors keen to divine the future of the auto industry and bet on it.

Their belief in Chairman Elon Musk’s vision for an electrified automotive future is powering Tesla’s market capitalization past much-larger Ford Motor Co. to make the Silicon Valley start-up the second most valued American automaker.

At the market close Wednesday, investors valued Tesla’s outstanding shares at $49.53 billion, slightly behind General Motors Co.’s $51.34 billion. The market capitalization of Ford totals $45.19 billion — a harsh reminder that investors believe profitability today is no guarantee of growth in the future.

Who says the industry that put America on wheels, that defined Detroit for the past century, isn’t ripe for disruption? More than a few investors think it is, and they’re using their wallets to suggest that Musk’s Tesla is the current favorite to do the disrupting.

In a note Wednesday, posted as Tesla shares surged north of $300 each, Morgan Stanley’s Adam Jonas urged investors to “view Tesla as a transportation/infrastructure company” instead of “just a car company.” His reasoning:

“The addressable markets within Tesla’s ecosystem could potentially include a $10 trillion light vehicle mobility market, a $1 trillion logistics market, a $2 to $3 trillion energy market and a potential multi-trillion market captured in the 600 billion hours of consumer time spent in cars in the form of content delivery and data monetization.”

Now, the likes of Ford CEO Mark Fields and GM CEO Mary Barra say Detroit’s leading two automakers are angling for pieces of those markets, too. And a new study this week from Navigant Research ranks Ford and GM first and second, respectively, in the development of self-driving cars and enabling technologies.

Tesla ranked 12th, the firm said, trailing Volkswagen AG, BMW AG, Delphi Automotive Plc and the Google-affiliated Waymo, among others. The upshot: Tesla may be basking in the can-do-no-wrong glow of Silicon Valley, but it’s not the only player in the interconnected global game of electrification and autonomy.

“Musk has articulated a vision for providing mobility services direct from Tesla as well as a platform for individual owners to share their vehicles once they are automated,” Navigant concluded. “However, the company has a limited distribution network and a history of losing money that may not improve as it moves down market.”

There’s no disputing that Tesla continues to defy the auto industry’s traditional conventions. It loses money? The stock goes up. It misses production targets? The stock goes up. It exceeds sales goals, as it did in the first quarter? The stock goes up.

GM, Ford and a whole lot of others from Stuttgart and Munich to Tokyo and Paris wish they had similar afflictions. But they don’t. And anyone who knows anything about the industry knows investors are not as forgiving with major players as they are with Musk, as much a master marketer as he is a visionary.

The double standard may not be “fair,” but it’s an accurate representation of the growth gulf separating the traditional auto industry from the high-tech business; of Detroit’s legacy of bureaucracy, mediocrity and bankruptcy; of Silicon Valley’s reputation for innovation, iconoclasm and fat profit margins.

Tesla says that by the end of next year, it will build 500,000 new Model 3 compacts, expected to sell for around $40,000 and go 215 miles on a charge, and the stock goes up. Never mind the segment, already occupied by the 238 miles-a-charge Chevrolet Bolt, is poised to be flooded with competing products from across the industry.

Volkswagen, Honda Motor Co. and Nissan Motor Corp., each with well-established product cred and dealer networks, are expected to launch electric vehicles aimed at precisely the same segment coveted by Tesla’s Model 3 — a comparatively tiny piece of the lucrative U.S. market.

In short, the move by Tesla into the volume segment will give it something it hasn’t much had selling $90,000-something luxury models: competition, courtesy of rivals with demonstrated capability in engineering, manufacturing, distribution and supply-chain management.

The luxury space is hotting up, too. VW’s Audi unit is expected to launch its all-electric E-tron SUV early next year. Jaguar Cars Ltd. plans to introduce its I-Pace electric SUV in the second half of 2018. And Volvo Cars Ltd. is pushing hard in the self-driving space.

Who’s going to buy all these electric cars? Gas-electric hybrids and all-electric vehicles account for roughly 3 percent of the U.S. market. Gasoline is comparatively cheap, demand for pickups and SUVs is strong, and demand for small cars is collapsing.

In the United States, anyway. China is another story entirely, given its bureaucratic push for electrification. Tesla is building ties there in ways that could help expand its market presence dramatically by making it a larger player there.

Late last month, one of China’s leading internet companies, Tencent Holdings Ltd., acquired a 5 percent stake in Tesla for nearly $1.8 billion. With interests in mobile, telecom and online advertising, Tencent also owns a stake in Nio, which plans to launch an autonomous electric car in the United States by 2020.

This is a global electric game. Tesla is a player, but it’s not the only one — or the guaranteed winner.


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Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.

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