The differing experiences of carmakers old and new tells us a lot about the reality of all investing – numbers on the board and performance which matches the promises.
For example, Tesla shares dropped more than 5% Thursday on lightly-sourced reports of a slowdown in sales in China.
But shares in the old, established General Motors hit an all-time high on an update that it is doing much better than expected (with its old fashioned no EV cars and trucks), even with the current shortage of computer chips.
The auto maker told the market it expects a “significantly better” first half of 2021 than it previously thought and that it hopes to increase vehicle deliveries in the US and Canada.
The company said it expects first-half profits will be “significantly better” than previously forecast, in part because of success shifting scarce semiconductors to boost production of its highly profitable trucks in North America and sourcing these from Canada.
In May GM said that factoring out one-time gains and charges the company expected net profit of around $US3.5 billion and the year to December, net profit was seen between $US6.8 billion and $US7.6 billion
On a pre-tax basis GM said in May it expected full year profits “at the higher end” of a $US10 billion to $US11 billion range.
Seeing the company reported a higher, $US4.4 billion in operating profit for the first quarter, the new guidance indicates the gain in second-quarter pre-tax profits will exceed $US1.1 billion.
GM shares traded as high as $US63.68 on Thursday, setting a new intraday record, based on data available through November 2010 (when it was re-listed after being bailed out by the Obama administration.
The shares closed up 6.4% at $US63.46, the biggest one-day percentage gain since January 19, when they jumped 9.75% when it revealed a new renewable strategy to eliminate nearly all ICE (Internal Combustion Engine) powered vehicles by 2035.
GM shares are up 52% year-to-date in 2021 and 118% in the past year, compared to gains of about 12% and 34% for the S&P 500 index in the same periods.
But for Tesla different story for the fading highflier as US media reports claimed the company’s net monthly orders in China in May halved to 9,800 from 18,000.
Tesla’s recently opened Shanghai factory is supposed to have the capacity to make around 500,000 electric cars a year for deliveries in China and exports to other parts of Asia and Europe.
CNBC reported that “Elon Musk’s electric vehicle company has been grappling with recalls and safety investigations in China. It is also dealing with a public relations backlash there following some high-profile vehicle crashes, price changes and quality complaints from Chinese customers.
It is also facing similar publicity problems in the US with several recent high-profile accidents and deaths involving its vehicles.
Tesla shares are still much higher than GM’s $572 against $US63 and the market value shows an enormous difference – $US583 billion against $US86.5 billion for GM (and a record).
But after the stellar 2020 year, 2021 has been a very different year for Tesla on the market. The shares are down nearly 8% year to date, trailing the wider market and down nearly 19% in the past 12 months.
Tesla shares peaked around $US880 in January this year and at Thursday’s price are down more than 34%.
Founder Elon Musk hasn’t helped his cause with wild tweets, especially about cryptocurrencies.
So it looks as though GM is performing (and will have more details on its EV strategy in its second half update in a couple of months) while Tesla is promising, and dithering.
