Within minutes of the stock market’s open on Tuesday, shares of Tesla Inc. shot up 17 per cent. Which feels extraordinary, except for the fact that they gained more the previous day — 20 per cent — and also surged 10 per cent one day last week and seven per cent and 10 per cent the week before that.
By the time the market closed, the stock had gained 112 per cent this year, giving the electric-vehicle maker a market value greater than that of General Motors Co., Fiat Chrysler Automobiles NV and Volkswagen AG combined. There is, not surprisingly, plenty of wonder and awe on Wall Street about the rally — no other stock on the Nasdaq 100 is even up a quarter as much in 2020 — but few concrete explanations as to what’s driving it.
Theories abound, including many of the tried and true: It’s the result of CEO Elon Musk delivering record revenue and his fourth quarterly profit in six periods; or it’s a short squeeze; or it’s the opening of a key new factory in China; or it’s an extreme case of FOMO sweeping across the investor community. Or it’s a combination of all of the above.
There is another school of thought emerging, though, that likely also helps explain the magnitude of the rally. The gist is that the long-held assumption that legacy automakers will catch up to Tesla in the electric-vehicle market is wrong. In fact, Musk may be adding to his lead, ensuring in the process that the company dominates one of the true growth markets in the world for years to come.
“There’s a recognition that Tesla is in a preeminent position in terms of EV technology,” Peter Rawlinson, the chief executive officer of Lucid Motors Inc., said in an interview Monday at the BloombergNEF Summit in San Francisco. “They’re even further ahead than has been reported, and I think the gap is widening, not closing.”
Tesla rose as much as 24 per cent to US$968.99 Tuesday before plunging suddenly in the last few minutes of trading, trimming share prices by more than US$100 each, and bringing the stock’s one-day gain to 14 per cent. Rawlinson’s praise echoed comments made recently by the CEO of Volkswagen, the world’s top-selling automaker. Tesla eclipsed the German manufacturing giant by market capitalization on Jan. 22. Not even two weeks later, its US$159.9 billion value at Monday’s close exceeded VW’s by more than US$66 billion.
Cars will “become the most important mobile device,” VW’s Herbert Diess told top executives at an internal meeting last month. “If we see that, then we also understand why Tesla is so valuable from the view of analysts,” he added, lamenting that VW isn’t also looked at as tech-like.
Mud Slinging
Rawlinson, who was chief engineer of the Model S before joining Lucid in 2013, wasn’t always this positive, even going so far as to talk down his former employer’s product.
“I contend that Tesla is not truly luxury,” he told Bloomberg News in September 2018, when Lucid had just secured a US$1-billion investment and Musk was less than a month removed from trying and failing to take Tesla private. Rawlinson said then that Teslas were “premium and high-tech, but not luxury.” On Monday, he reiterated his view that the interiors of Tesla’s cars fall short.
But since that earlier interview, Musk has built a commanding lead in the still-fledgling U.S. EV market, and the Model 3 has risen to become one of the top-selling cars in Europe — electric or otherwise. Tesla needed only a year to construct its first overseas assembly plant in China and last month started deliveries of locally built sedans. By March, it plans to begin handing over Model Ys to customers, months ahead of schedule.
“We think they are pretty far ahead in battery and EV technology,” Adam Jonas, an analyst at Morgan Stanley, said in an interview. “Tesla has moved from being seen as an auto stock to being seen as a tech stock” that is “mentioned in the same breath as Amazon, Apple and Google.”
‘Technological Gulf’
Global carmakers from VW to General Motors Co. are pouring billions into electric vehicles, trying to capture some of Tesla’s stock-market mojo while also meeting tighter emissions standards around the world. But the inferior battery range of recent EV entrants including Audi’s e-tron crossover and Porsche’s Taycan sports car show how far legacy automakers are lagging behind, Rawlinson said.
“I’m not being critical of the Germans — it’s wonderful they’re creating these cars and coming in,” he said. “But it just shows much of this technological gulf remains.”
Lucid’s debut model, the all-electric Air sedan, is scheduled to start production in December, and the company hopes to deliver 15,000 units in the first year. Pre-production versions are exceeding 400 miles of range in testing, Rawlinson said.
Musk said during an earnings call last week that the Model Y crossover will have 315 miles of range, which would handily beat the Audi e-tron and Porsche Taycan’s U.S. Environmental Protection Agency-estimated ranges of just over 200 miles.
Traditional automakers are at a disadvantage when it comes to building battery-electric vehicles because they have to keep spending money and resources on combustion-engine cars, which influences how they think about vehicle design and battery-pack efficiency, Rawlinson said.
Head Start
Even automakers such as VW and GM, whose pockets are deep enough to invest in dedicated EV platforms, are behind because they don’t put a high enough priority on developing EV technology in-house, he said. Traditional manufacturers and even some EV startups “are saying the electric powertrain is already commodified, that it’s not a differentiator.”
Lucid will announce a contract with a major cell maker soon, but battery chemistry is only part of the battle. Pack architecture, software and thermal management are just some of the elements necessary to achieve superior range, Rawlinson said. The company is beginning to seek funding for a new electric SUV based off the same platform as the Air.
In the meantime, Gene Munster, a reliable Tesla bull, says that while it’s premature for the electric-car maker to be valued like Apple Inc., the comparison will gain credibility as long as Musk keeps increasing revenue.
“The thesis for Tesla’s business miracle is rooted in the handful of years that the company operated with effectively no competition,” Munster, managing partner of the venture capital firm Loup Ventures and long-time Apple analyst, wrote Monday in a research note. “Tesla has nearly a decade head start in EVs as other automakers under-invested in the space.”
Human Resources Officers must be very busy these days what with the general turnover of employees in our retail and business sectors. It is hard enough to find skilled people let alone potential employees willing to be trained. Then after the training, a few weeks go by then they come to you and ask for a raise. You refuse as there simply is no excess money in the budget and away they fly to wherever they come from, trained but not willing to put in the time to achieve that wanted raise.
I have had potentials come in and we give them a test to see if they do indeed know how to weld, polish or work with wood. 2-10 we hire, and one of those is gone in a week or two. Ask that they want overtime, and their laughter leaving the building is loud and unsettling. Housing starts are doing well but way behind because those trades needed to finish a project simply don’t come to the site, with delay after delay. Some people’s attitudes are just too funny. A recent graduate from a Ivy League university came in for an interview. The position was mid-management potential, but when we told them a three month period was needed and then they would make the big bucks they disappeared as fast as they arrived.
Government agencies are really no help, sending us people unsuited or unwilling to carry out the jobs we offer. Handing money over to staffing firms whose referrals are weak and ineffectual. Perhaps with the Fall and Winter upon us, these folks will have to find work and stop playing on the golf course or cottaging away. Tried to hire new arrivals in Canada but it is truly difficult to find someone who has a real identity card and is approved to live and work here. Who do we hire? Several years ago my father’s firm was rocking and rolling with all sorts of work. It was a summer day when the immigration officers arrived and 30+ employees hit the bricks almost immediately. The investigation that followed had threats of fines thrown at us by the officials. Good thing we kept excellent records, photos and digital copies. We had to prove the illegal documents given to us were as good as the real McCoy.
Restauranteurs, builders, manufacturers, finishers, trades-based firms, and warehousing are all suspect in hiring illegals, yet that becomes secondary as Toronto increases its minimum wage again bringing our payroll up another $120,000. Survival in Canada’s financial and business sectors is questionable for many. Good luck Chuck!. at least your carbon tax refund check should be arriving soon.
NORMAN WELLS, N.W.T. – Imperial Oil says it will temporarily reduce its fuel prices in a Northwest Territories community that has seen costs skyrocket due to low water on the Mackenzie River forcing the cancellation of the summer barge resupply season.
Imperial says in a Facebook post it will cut the air transportation portion that’s included in its wholesale price in Norman Wells for diesel fuel, or heating oil, from $3.38 per litre to $1.69 per litre, starting Tuesday.
The air transportation increase, it further states, will be implemented over a longer period.
It says Imperial is closely monitoring how much fuel needs to be airlifted to the Norman Wells area to prevent runouts until the winter road season begins and supplies can be replenished.
Gasoline and heating fuel prices approached $5 a litre at the start of this month.
Norman Wells’ town council declared a local emergency on humanitarian grounds last week as some of its 700 residents said they were facing monthly fuel bills coming to more than $5,000.
“The wholesale price increase that Imperial has applied is strictly to cover the air transportation costs. There is no Imperial profit margin included on the wholesale price. Imperial does not set prices at the retail level,” Imperial’s statement on Monday said.
The statement further said Imperial is working closely with the Northwest Territories government on ways to help residents in the near term.
“Imperial Oil’s decision to lower the price of home heating fuel offers immediate relief to residents facing financial pressures. This step reflects a swift response by Imperial Oil to discussions with the GNWT and will help ease short-term financial burdens on residents,” Caroline Wawzonek, Deputy Premier and Minister of Finance and Infrastructure, said in a news release Monday.
Wawzonek also noted the Territories government has supported the community with implementation of a fund supporting businesses and communities impacted by barge cancellations. She said there have also been increases to the Senior Home Heating Subsidy in Norman Wells, and continued support for heating costs for eligible Income Assistance recipients.
Additionally, she said the government has donated $150,000 to the Norman Wells food bank.
In its declaration of a state of emergency, the town said the mayor and council recognized the recent hike in fuel prices has strained household budgets, raised transportation costs, and affected local businesses.
It added that for the next three months, water and sewer service fees will be waived for all residents and businesses.
This report by The Canadian Press was first published Oct. 21, 2024.
TORONTO – A new report says many Canadian business leaders are worried about economic uncertainties related to the looming U.S. election.
The survey by KPMG in Canada of 735 small- and medium-sized businesses says 87 per cent fear the Canadian economy could become “collateral damage” from American protectionist policies that lead to less favourable trade deals and increased tariffs
It says that due to those concerns, 85 per cent of business leaders in Canada polled are reviewing their business strategies to prepare for a change in leadership.
The concerns are primarily being felt by larger Canadian companies and sectors that are highly integrated with the U.S. economy, such as manufacturing, automotive, transportation and warehousing, energy and natural resources, as well as technology, media and telecommunications.
Shaira Nanji, a KPMG Law partner in its tax practice, says the prospect of further changes to economic and trade policies in the U.S. means some Canadian firms will need to look for ways to mitigate added costs and take advantage of potential trade relief provisions to remain competitive.
Both presidential candidates have campaigned on protectionist policies that could cause uncertainty for Canadian trade, and whoever takes the White House will be in charge during the review of the United States-Mexico-Canada Agreement in 2026.
This report by The Canadian Press was first published Oct. 22, 2024.
