Ford, GM and Volkswagen Shares Are Hot. Thank Electric-Vehicle Mania.

Ford is up 49% so far this year, while GM’s shares have surged 48%. VW’s stock is up 55% and even briefly rose 29% in intraday trading one day this week when the company held a “Power Day” event, saying it would build six EV battery factories in Europe alone over the next 10 years. VW has this week also eked ahead of SAP SE to become the most valuable stock on the German DAX index.

By comparison, the S&P 500 index is up just 7.4% so far this year.

The new infatuation with established auto makers, many of which have been in business for more than a century, follows an earlier rush into electric-vehicle stocks that has driven shares of Tesla Inc. and other electric vehicle and battery manufacturers into territory that some analysts say is reminiscent of the dot-com bubble of the 1990s.

Conventional auto makers have long stewed in the shadow of Tesla, whose market capitalization remains twice that of VW, GM and Ford combined. But as the incumbents deepen their commitment to electric cars, they are beginning to persuade investors that they are serious about turning away from fossil fuels and embracing green technology.

As a result of greater investor confidence in the EV plans of conventional auto makers, industry analysts say those companies’ shares are undergoing a fundamental repricing. Meanwhile, Tesla’s shares have fallen nearly 4% since January and some analysts are wondering if the resurrection of Big Auto rings in a new era: Peak Tesla.

As traditional car makers make deeper inroads into their electric niches, Tesla and other relative newcomers will find it harder to justify their high valuations, said Michael Muders, a senior fund manager with Union Investment. “What we’re seeing…is a re-evaluation of the traditional manufacturers by the financial markets.”

Tesla didn’t immediately respond to requests for comment.

Investors began reconsidering their conventional wisdom—that legacy car makers would be out of business in 10 years—after VW, Ford, GM and others made clear that they weren’t just building new models but transforming their businesses.

GM recently won praise from investors when it said it would stop selling gas-powered cars by 2035 and accelerated plans to produce EVs and batteries. VW has converted several factories into dedicated EV plants and its six newly announced battery factories in Europe would be enough to power nearly four million new EVs a year, analysts said.

Also driving enthusiasm are figures over the past few months suggesting cars and trucks powered by internal combustion engines remain profitable enough despite the ravages of the pandemic to fund large investments in electric vehicles and still pay dividends.

“I really would like to emphasize that the [combustion engine] cars are cash machines,” Daimler AG finance chief Harald Wilhelm told reporters last month when reporting last year’s earnings. “Cash machines will build the bridge into an [electric] future.”

Mr. Wilhelm rejected a long-held assumption among industry analysts that electric vehicles would always generate lower margins than conventional vehicles. He said Daimler was working hard to bring down their costs and boost their profitability.

Daimler shares are up more than 25% this year.

Not all traditional car makers have benefited, however. A survey of investors by Bernstein Research, a brokerage firm, showed that 75% of respondents said a clear message and cogent EV strategy was very important or critical in making their investment decisions.

“The substantial positive market reaction to GM’s presentation on its EV and software plans services as a good example how much perception matters to institutional and retail investors nowadays,” Arndt Ellinghorst, a Bernstein analyst, wrote in a note to clients.

That explains the surge in VW shares after it laid out in more detail than before how it plans to catch up with Tesla and become a dominant player in the global EV market. Other beneficiaries of the trend include Mitsubishi Corp. , whose shares have risen around 27% since January, and Hyundai Motor Co. , up 12%.

Just as quickly as traditional auto makers have won the love of global investors they could easily lose it again if they fail to deliver on the lofty promises of building and selling millions of EVs at a profit comparable to their current business with gas-guzzlers, analysts warn.

Proving the point, those auto makers with a looser commitment to EVs have lagged behind those that are pushing aggressively into EVs. Toyota Motor Co. , the world’s biggest auto maker by sales, has relied on its hybrid vehicle technology to meet emissions regulations around the world. Its shares have risen nearly 5% so far this year, well behind the broader stock market.

BMW AG was one of the first conventional auto makers to develop an electric vehicle and bring it to market, launching the i3 city car in 2013. But after lackluster success, it pulled back on EVs for several years.

While VW has created a standard technology platform for its range of EVs, BMW has relied largely on converting traditional models to EVs and building plug-in hybrids. Oliver Zipse, the company’s chief executive, said Wednesday that BMW would accelerate its EV plans, but wouldn’t commit itself entirely to battery electric vehicles.

“We can assume that in every market a certain technology will become dominant,” Mr. Zipse said. “It becomes expensive when you bet too early on one solution.”

BMW shares are up about 19% so far this year, outpacing the broader market on the back of strong earnings during the pandemic, but lagging behind German rivals VW and Daimler.

Write to William Boston at [email protected]