AutoNation's CEO Calls Tesla Overvalued -- WSJ
April 12 2017 - 3:02AM
Dow Jones News
By Mike Spector and Christina Rogers
The head of the U.S.'s largest car-dealership chain called Tesla
Inc.'s market value "inexplicable," a day after investors pushed
the Silicon Valley auto maker ahead of General Motors Co.
Tesla "is either one of the great Ponzi schemes of all time" or
will eventually work out for investors, said AutoNation Inc. Chief
Executive Mike Jackson during an interview at a New York automotive
event held by J.D. Power and the National Automobile Dealers
Association on Tuesday.
Mr. Jackson, among the auto industry's more outspoken
executives, called Tesla overvalued and GM undervalued at roughly
$33 a share, arguing the former will continue to struggle to make
money selling electric vehicles despite a loyal following.
Competition would eventually lead to a correction to the Palo
Alto, Calif., company's market value, he said. GM and other auto
makers are investing billions of dollars in electric vehicles that
are set to hit showrooms in coming years.
A Tesla spokeswoman didn't immediately respond to a request to
comment.
Tesla briefly leapfrogged GM as the most valuable auto maker in
the U.S. on Monday when the company's stock price surged to
$313.73, valuing it at $51.17 billion. Tesla last week also
surpassed Ford Motor Co. in market value.
Investor enthusiasm for Tesla has continued throughout the year,
pushing shares up more than 40% while Detroit auto makers' stock
prices have been stuck in neutral. That is despite Tesla's
unprofitable operations selling expensive electric cars and
sport-utility vehicles, and questions about whether the company can
successfully deliver on a mass-market Model 3 car for around
$35,000, ramp up production to 500,000 vehicles overall next year
and master software enabling self-driving cars.
Mr. Jackson said Tesla Chief Executive Elon Musk deserves
accolades for establishing a valued brand that enthusiasts embrace.
"You have to tip your hat," Mr. Jackson said. "He has created a
brand that has a strong cultlike following."
But Mr. Jackson emphasized that Tesla remains unprofitable
selling rarefied luxury vehicles that can run $100,000, so the
company's bottom line isn't likely to get a lift from the
more-affordable Model 3. "What would impress me about Tesla?
Selling vehicles at a profit," Mr. Jackson said. He said it wasn't
a good idea to be "giving away vehicles at below the cost of what
you have to make them."
With cheap gasoline, electric vehicles remain a sliver of U.S.
sales, while fuel-thirsty trucks and SUVs have surged to a 60%
share. "This shift to sport-utility vehicles -- it is permanent, it
is structural, it is long term, because customers passionately love
these vehicles," Mr. Jackson said.
Mr. Jackson said he voted for Democrat Hillary Clinton in the
November presidential election, concerned about Donald Trump's
temperament.
He said Mr. Trump's early days in office have validated his
determination. "One minute he's a 70-year-old, the next minute he's
a petulant 7-year-old," Mr. Jackson said. He criticized Mr. Trump
and congressional Republicans for their recent legislative defeat
on health-care overhaul after years of promising to undo the
Affordable Care Act passed under President Barack Obama.
But Mr. Jackson painted a positive business landscape under the
Trump administration, lauding the president's efforts to curtail
regulations and attempts to boost the economy. He praised the White
House's recent decision to reopen a review of tough emissions
standards requiring companies to sell vehicles averaging 54.5 miles
a gallon, or 40 mpg in real-world driving, by 2025. Consumers are
turning to trucks and SUVs amid cheap gas, and the advent of
fracking is likely to help keep fuel prices low, Mr. Jackson
said.
Tim Higgins contributed to this article
Write to Mike Spector at mike.spector@wsj.com and Christina
Rogers at christina.rogers@wsj.com
(END) Dow Jones Newswires
April 12, 2017 02:47 ET (06:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
Tesla (NASDAQ:TSLA)
Historical Stock Chart
From Mar 2024 to Apr 2024
Tesla (NASDAQ:TSLA)
Historical Stock Chart
From Apr 2023 to Apr 2024