January 18, 2019 11:45 AM, EST

Tesla Loses Most Valuable Carmaker Crown as GM Catches Up

Tesla cars and SUVs in a production lineA line of new Tesla Model X SUVs (center) sit with Tesla Model S cars following assembly for the European market at the Tesla factory in Tilburg, Netherlands. (Jasper Juinen/Bloomberg)

The battle between Tesla Inc. and General Motors Co. for the most valuable U.S. carmaker is heating up.

After Tesla followed in the footsteps of the legacy automakers and announced a plan to cut jobs on Jan. 18, shares of the electric vehicle maker dropped as much as 10% in New York, bringing its market capitalization to just $54.2 billion. GM, whose shares gained as much as 0.6% Jan. 18, is now valued at $54.4 billion.

GM-Tesla graphic

If the outlooks from the two auto companies are anything to go by, GM looks set to be winning the race for the year. Tesla’s forecast of a “very difficult road” ahead, as it tries to ramp up the production of the lower-priced versions of the Model 3 sedan, contrasts starkly with the surprise outlook from GM earlier this month. The company, which was expected to warn about tough times due to a slowdown in auto markets in Europe and China, dismissed all concerns and forecast a strong profit, surprising investors.

Despite going through a rough and turbulent year as a company, Tesla shares managed to gain about 7% in 2018, mostly helped by strong deliveries and profit for the third quarter, while GM’s stock dropped more than 18%. The trend has been reversed so far this year, with Tesla dropping 5.6% and GM rising nearly 15%.

RELATED: Tesla Cuts Jobs on the Road to Making an Affordable Car

Tesla’s job cut news was not unexpected, Jefferies analyst Philippe Houchois said, noting that it was consistent with slower growth rates and also an opportunity to improve productivity. The analyst said Tesla still leads the electric vehicle industry as it moves the price of its Model 3 car toward $35,000, while most competitors remain engaged in an “EV-negative margin sum game at higher price points.”

Still, the U.S. peers are valued at a fraction of the global heavyweight, Toyota Motor Corp. The Japanese carmaker’s market cap sits at 22.2 trillion yen, or $202.8 billion.