In a US and global first investors now agree that Tesla, the US electric car maker (and tiddler so far as actual production and sales are concerned) is the future. They may be right, they may be wrong, but what we saw overnight Monday was a rare event.
In fact on the day that American car sales fell to their lowest annual pace in two years, we saw a big change on the US stockmarket.
The value of electric car maker Tesla soared on a day when the wider market fell to where it became the second most valuable US car company. The continuing record run for Tesla shares saw its market value go past that of the Ford Motor Co. to become America’s No. 2 car company (by market value, not sales).
Tesla’s value is also based on its huge ambitions in battery manufacture, as we have learned in Australia recently. It already supplies battery systems to the home market in the US, Australia and it has just moved into solar energy via the takeover of an associate company. And all this is on top of its space travel ambitions as well.
But electric cars and batteries are Tesla’s best known products, especially the cars and the shares jumped 7.3% to close at a record $US298.52 on Monday because of a good (in the eyes of the market) quarterly sales report.
That put Tesla’s market value around $US48.7 billion vs. Ford’s $US44.6 billion. General Motors Co. is the largest US car maker by market capitalisation, which around $US51.2 billion. Tesla shares are up nearly 40% so far this year, which compares with gains of 5.3% for the S&P 500 index. Ford shares fell 1.7% to $US11.44 and are down more than 5% so far this year.
So it is conceivable that barring a stockmarket slide Tesla could easily become the biggest US car company by value in the next few months. All it needs is another 5%-6% rise in its share price – or around $US4 billion in value). Based on the surge so far this year, it is conceivable this could happen in the next fortnight with GM (and Ford) shares are under pressure because of the accelerating downturn in US car sales, as the March figures showed.
Besides GM, BMW (worth just over $US55 billion), Daimler (worth just over $US73 billion), Honda ($US54billion), VW, ($US72 billion) and the mighty Toyota ($US160 billion) are ahead of Tesla globally so far as market value is concerned. Tesla’s market value already exceeds that of Fiat Chrysler ($US15 billion) and Nissan (US37 billion) and Peugeot/PSA ($US15.7 billion).
So Tesla joins the likes of Microsoft which with IBM created the PC industry and all that follows, including Apple which in turn reinvented mobile phones. Google has also done it and Facebook has certainly crunched open and created an entire new industry.
Now the most venerable (dare I say, iconic?) of American industries – cars – stands on the cusp of significant change from a new tech challenger in the eyes of investors – and the global car industry won’t be the same again.
The reality of what happened on Wall Street overnight Monday is that investors think Tesla is the future so far as car making and power (electric) are concerned. Donald Trump and his cast of ignoramuses can huff and puff all they like about the damage climate control measures are doing to the US and US industry, but investors have accepted that climate change is real and decided that a company promoting a transportation system that is low polluting and helps fight climate change is viable and the future.
It may be self-driving vehicles, it may be be driving systems shared with humans, but the propulsion method of choice is electric based, not fossil fuels. That’s why Toyota is spending heavily on a hydrogen powered car, as well as electric only and hybrids. Trump and his older white supporters are being left behind.
Monday’s price jump came after Tesla on reported preliminary first quarter deliveries that were a bit higher than market forecasts. Investors said this indicated that the company is on track to launch the Model 3, the company’s mass-market sedan, later this year as expected. Model X deliveries were up 22% from fourth-quarter numbers.
Problems with the production of the Model X, the second car developed and made by Tesla, hit the company’s share price when the SUV launched in September 2015, behind schedule. Tesla has said it expects to deliver 47,000 to 50,000 vehicles in the first half of the year.
The Model 3 is key to Tesla’s expansion plans, which include producing vehicles at a rate of 500,000 a year by the end of 2018. Tesla hopes to sell the $US35,000 car by the end of the year, starting production of the first few around July.
Tesla’s sales are much smaller than the bigger companies, so its shares are priced on ‘blue sky’ like a tech stock rather than a manufacturer, which is something completely lost by President Trump who has bashed the likes of GM and Ford for trying to move facilities to Mexico and forced them to change tack to ‘save’ jobs.
Under Trump’s very nose, Tesla, if it meets its half a million in sales target by the end of next year (and in a weak overall market), will probably force Ford, GM and other makers to lay off workers and possibly to close or idle some car factories. A weak market for traditional car sales won’t help the established makers.
US vehicle sales in March fell to the lowest level in more than two years, hit by factors including the widening price gap between new and used autos as well as rising interest rates and a fall in potential new car buyers. According to Autodata, US vehicle sales ran at a seasonally adjusted annual rate of 16.62 million, down from 17.58 million in February. The annual rate reached 18.54 million in December of last year and has fallen since.
The figures showed declines in the rates of both new car and light truck sales, foreign and domestic. SUVs/trucks and passenger vehicle sales all fell. And it is impacting used car sales which fell 4% in February.
That in turn will hit the huge US car leasing and rental markets.
We will see more job losses, more factory closures and more ranting and tweeting from the fool in the White House. If anyone thought Uber and Air BnB were big deals, what happened n Monday on Wall Street is an even bigger deal.
And when Tesla’s market value passes that of GM it will further emphasise the changed landscape for motoring around the globe.
