Tesla slips from market perch; GM back on top
After three months as the nation’s most valuable automaker, a bad week in an otherwise stellar year knocked Tesla from the top perch.
Over the first six months of the year, Tesla Inc. shares gained more than 50 percent and the electric-car company passed General Motors Co. and Ford Motor Co. in market capitalization. But shares have plunged almost 15 percent this week, translating to lost market value of $8.7 billion.
GM has regained the top spot with a value of $52.67 billion compared with $50.74 billion for Tesla.
Tesla has been hit by a trifecta of bad news, starting with a tweet from Tesla CEO Elon Musk. Shares are on track for their worst weekly percentage decline since early 2016 — they fell nearly 6 percent Thursday alone.
On Monday, Musk tweeted that the Palo Alto, California, company anticipates production of 20,000 Model 3 cars per month in December, which was below previous estimates. Tesla also said Monday that it delivered about 22,000 vehicles in the second quarter, bringing first-half deliveries to about 47,100. That’s at the low end of the company’s projections earlier this year of between 47,000 and 50,000 deliveries.
Then on Wednesday, the dynamics of the electric car market shifted a bit when Volvo announced that by 2019, it would be producing only electric and hybrid vehicles, the first traditional automaker to make that leap. Volvo, which is based in Sweden but owned by Chinese firm Geely, will launch five fully electric cars between 2019 and 2021. Three of them will be Volvo models and two will be electrified cars from Polestar, Volvo Cars’ performance car arm. It also plans to offer a range of hybrids as options, expecting to sell 1 million electrified cars by 2025.
GM is already selling the Chevrolet Bolt, and Audi plans to introduce an electric SUV next year. Ford will have one by 2020.
On Thursday, one day after the Volvo announcement, the Insurance Institute for Highway Safety said that while Tesla’s Model S received an acceptable rating in its small-overlap front crash test, it did not get the Top Safety Pick+ rating the Lincoln Continental, Mercedes-Benz E-Class and Toyota Avalon received. The relatively new test gauges the safety of those inside the car when the front driver-side corner of a vehicle hits a tree or utility pole, or collides with another vehicle.
The IIHS said that the main issue with the Model S performance was that the safety belt allowed the torso of crash dummies to move too far forward, allowing the head to strike the steering wheel hard through the air bag. IIHS said Tesla modified the vehicle and they retested it, but the same thing happened.
Tesla said Thursday that the carmaker’s rating for the small-overlap front crash test was the second-highest rating available and that the company received the highest rating in the rest of IIHS’s crash testing categories. A Tesla representative maintained that “the most objective and accurate independent testing of vehicle safety is currently done by the U.S. government, which found Model S and Model X to be the two cars with the lowest probability of injury of any cars that it has ever tested.”
Tesla’s gains this year are still noteworthy. The shares are still up more than 40 percent. GM shares gained about 2 percent in the same period, while Ford’s have declined.
But heading into a day that should be cause for celebration, with Tesla’s first Model 3 sedan rolling off the assembly line Friday, Musk has watched $12 billion in stock-market value slip away. Most of the drop since the June 23 peak of almost $63 billion occurred just this week.
“Tesla still faces a lot of challenges,” said Michelle Krebs, a senior analyst at Autotrader.com. “Tesla needs to focus on quality over speed as they ramp up the Model 3. The Volvo announcement drove home the fact that Tesla is going to face more competition. Tesla is no longer going to own electric vehicle territory exclusively, and traditional automakers really know how to crank out the cars.”
Bloomberg News contributed.
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