Analyst: Tesla and FCA Wouldn't Weather 'Mild Recession'
Business Insider transportation editor Matthew DeBord (formerly of Jalopnik too) said Tesla and Fiat Chrysler’s stock show both companies’ susceptibility to market volatility and that each automaker could be in dire situations if a mild recession were to rear its head again.
(Although he does note that the best return on an investment this time last year would have been a few hundred bucks into FCA’s stock.)
Tesla may have more in common with FCA than it likes in terms of market unpredictability, which could raise the specter of a merger if its Model 3 isn’t on time or if the economy takes a dive, DeBord writes. As long as Musk doesn’t talk openly about hugging Mary Barra, he may have a decent shot.
DeBord’s analysis is based of Tesla’s 2015 performance, which has been its best year as an automaker.
Tesla operates like a true startup, he writes, whereas FCA has a more established — albeit shaky — business model. Even though FCA had a very public failed courtship with General Motors and an announced delay in its return for Alfa Romeo, the company’s share price has surged nearly 20 percent for the year.
Tesla needs to meet base targets to continue; FCA needs to expand beyond selling Jeeps and gain traction in BRIC territories soon.
The similarities continue, but he raises an interesting point: if the the U.S. economy were to sink again, who’s getting saved?
More by Aaron Cole
Comments
Join the conversation
Tesla has a narrow window for success: if they cannot hit mass market adoption within the next five years they risk losing their big margins to Audi, BMW and Mercedes. The German three are on the cusp of a major hybrid and full electric product launch. Sure, Tesla has first mover advantage, but the big players bring a much broader dealership and service network along with significantly more brand cachet. As for FCA, they're more at risk of another petroleum shock due to the reliance on Jeep, Ram trucks and the 300 for the majority of their profits. My WAG (wild-assed-guess) is that with fuel prices staying at the low end of the band for the foreseeable future we'll see Tesla continuing to sell to the wealthy early adopters, the Germans will bring more petroleum-electric hybrids that make consumers comfortable and happy with 40-50mpg returns (and conversely make low end Teslas a harder sell), Jeep will keep selling oodles of Jeeps and the rest of FCA will falter. Spiking fuel prices will kill FCA's profits, won't do much for Tesla unless prices fall dramatically and the Germans will shift consumers from petrol to their hybrid/full electrics.
Low interest rates and low gasoline prices have created the perfect environement for selling/leasing trucks and Jeeps. Those two factors will not last forever.
"Business Insider..." Well there's your first problem.
FCA model line: 200, 300, 500. 500 looks kind of odd name. They should call it 50 instead.