Tesla Motors Inc Bounces Back After Monday’s Decline, But Why?


Tesla shares jumped on Tuesday after dropping 4.7% the day before. The jump in the stock follows an explanation from Global Equities Research analyst Trip Chowdhry that GE’s entry into the battery market will not be a threat for the EV maker.

GE lacks Tesla-like “entrepreneurial” skills

On Monday, Tesla shares were down after a report from Reuters, which claimed that GE is also planning to foray in the energy storage business. This, many thought, will not be good for Tesla’s battery business, which was launched in April. Reuters reported that GE is planning to be a “sizable” player in the battery market, which is just taking off and is expected to be worth $6 billion by the end of the decade. But Chowdhry, known to be a Tesla bull, suggested that GE’s battery products will not cut into Tesla’s business in any way.

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In a Barron’s blog post, Chowdhry said GE has more of a “bureaucratic” structure and lacks Tesla-like “entrepreneurial” skills. The analyst noted Tesla is a “fast” pace company that can easily overtake GE, which is “bureaucratically heavy.”

Market big enough

And even if GE releases its own battery products, the market is still very small with few chances of stiff competition. Even with up to 15 GWh of battery production capacity, Tesla will only be serving less than 1% of the households in the U.S., Chowdhry said, suggesting that the market presents a big opportunity and space for multiple players.

Chowdhry must have been banking on Tesla CEO Elon Musk when he penned his statements. It is under Musk’s leadership that the EV firm has gained the title of disruptor in the auto market. Apart from Musk, Tesla holds an advantage over rivals due to its Nevada-based gigafactory, which is expected to be the biggest lithium-ion battery factory globally. Though Tesla already enjoys a cost advantage in battery production, it expects to further lower the cost of its batteries by one-third once the factory is in full operation in 2016.

Prior to this week, Tesla shares have been rising steadily for the past three months following a decline to $185 in late March. On July 20, the shares hit a high of $286 following the launch of a Ludicrous Mode and 90kWh battery pack option for the Model S. On Tuesday, Tesla shares were up 4.67% at $264.82, and year to date, the stock is up by almost 20%.