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Name the first electric car company that comes to mind. What did you pick?
Tesla (NASDAQ:TSLA), right? And yet, in China, the first electric car that comes to mind when consumers are actually ready to buy is not a Tesla but a tiny electric car made by a General Motors (NYSE:GM) joint venture. The car costs just $4,300 and has a top speed of 62 mph and a driving range of just 105 miles, according to The Wall Street Journal (WSJ).
Priced at barely a tenth of the cost of a Tesla Model 3, the Hong Guang Mini EV manufactured by GM’s local “Wuling” brand has become China’s best-selling electric vehicle. In contrast to Tesla vehicles, which are favored by wealthy buyers in China’s bigger cities, the WSJ reports that the GM car is taking rural China by storm by targeting less affluent buyers in the country’s interior.
In the quarter ending Oct. 31, GM has sold 55,781 units of the Hong Guang Mini, 58% more than Tesla has sold Model 3s. (Aside from Tesla and GM, by the way, everyone else is an also-ran. Combined, these two car models command nearly 25% market share in China).
GM produces the Hong Guang Mini in cooperation with joint venture partner SAIC Motor, so it has to split the profits it makes on the Hong Guang Mini. But even so, we’re talking about a lot of potential profits here. Total revenues on GM’s EV probably approach $240 million for the quarter in question, and the WSJ says the electric car market in China doubled year over year in this period.
GM shares are up 4% in afternoon trading response to the news. Tesla shares are down 2%.
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Why Tesla Stock Tumbled 6% on Friday
Could General Motors (and maybe even Ford, too) really outperform Tesla?
Investors in Tesla (NASDAQ:TSLA) are having a very bad day today. Everyone in the stock market seems to be having a bad day, with the S&P 500 down nearly 2% and the Nasdaq down more than 2.5%. But investors in the electric car maker are suffering even more than most on Friday, incurring a 6.1% loss through 11:10 a.m. EDT on no apparent bad news specific to Tesla.
Instead, Tesla is tumbling in a stock market rocked by the latest coronavirus numbers, as the U.S. marches seemingly inexorably beyond 9 million infections, and toward 230,000 deaths.
Tesla also seems to face more competition in the electric car market. Earlier this week, Consumer Reports said that in its real-world driving tests, General Motors’ (NYSE:GM) Super Cruise autonomous technology outperformed Tesla’s Autopilot, leaving Tesla “a distant second” in its rankings.
Wall Street responded quickly to the report, with Wedbush saying Thursday that GM’s Hummer electric vehicle has sold out in its pre-order phase, and could prove a strong competitor to Tesla.
And today, Reuters is reporting that Ford (NYSE:F) is building its Active Driver Assist hardware into its very first batch of redesigned F-150 pickups and Mustang Mach-E electric SUVs, which will go on sale this year. By the third quarter of 2021, the company plans to activate the software remotely, adding new competition for Tesla.
Will consumers really prefer these new offerings from Tesla competitors, though, after years of getting progressively more familiar with its technology? Maybe, maybe not. But at a price-to-earnings ratio of 800, there’s zero margin of safety in Tesla stock already. Even a tiny increase in competition could do a lot of damage to the shares.