Why Tesla Stock rose today
A day after being the victim (like all the other actions on the planet) of yesterday’s clearance sale on the S&P 500, and suffering from an extra dose of bad news from the National Transportation Safety Board, shares of the electric car company You’re here‘s (NASDAQ: TSLA) the stock was granted a modest reprieve on Tuesday, rising about 1.5% until 3:15 p.m. EDT.
Part of the credit, however, goes to General Motors (NYSE: GM).
Image source: Getty Images.
As TheFly.com recalls today, GM announced late last week that it would extend the shutdown of production of Chevrolet Bolt electric cars at its Orion assembly plant in Michigan until at least October 15. . In addition to this news, this morning The Wall Street Journal reported that GM plans to start recalling and repairing battery packs from some 142,000 Bolt vehicles manufactured since late 2016.
The good news for GM here is that it and its supplier LG Chem “have identified and corrected a manufacturing defect” which was causing some Bolt cars to spontaneously set on fire. The bad news is that replacing suspect batteries will cost GM $ 1.8 billion, “making it one of the costliest safety measures in company history,” said the Review – and twice what we previously thought it would cost.
Now what does all of this have to do with Tesla? Well, the Bolt was GM’s first attempt to challenge Tesla’s dominance in electric cars. The fact that it hasn’t worked out well means Tesla doesn’t have much to fear from GM at the moment. Later, GM plans to introduce dozens of new competing electric models, but if GM’s reputation has been tainted by the Bolt fiasco, those models could also struggle to compete with Tesla.
That being said, Tesla faces competition from several other automakers, and not all of them will suffer GM’s fate. This is probably why Tesla stock, although modestly up today, still does not benefit more from bad news from GM.
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Rich Smith has no position in the stocks mentioned. The Motley Fool owns shares and recommends Tesla. The Motley Fool has a disclosure policy.
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