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Can Tesla Charge By Big Auto?

By Robert Stammers, CFA
Director, Investor Education

In January, after declaring bankruptcy just three years earlier, General Motors Company (NYSE:GM) reclaimed its mantle as the world’s top-selling automaker, a position it previously held for over 70 years. The condition of the U.S. auto industry seems to have improved dramatically, with annual sales reaching their highest level since 2008.

GM has gained market share amid growing global demand and at the expense of Japanese automaker Toyota Motor Corporation (NYSE:TM), which is still battling the effects of the March 2011 earthquake and tsunami. While GM, Toyota, and the world’s new number two automaker, Volkswagen, battle it out at the top, a new threat from an upstart electric vehicle (EV) automaker could reshape the auto industry, and investors are taking notice.

We’ve Been Here Before
Palo Alto–based Tesla Motors, Inc. (NASDAQ:TSLA), is that EV automaker. The impending arrival of Tesla’s EV fleet is thought to be behind a big move for the stock. Since the June 2010 IPO, shares of Tesla are up 54%, more than doubling Ford Motor Company’s (NYSE:F) 20% gains over the same period of time. Meanwhile, GM is down 30% following its own November 2010 IPO.

Even though Tesla is generating a lot of buzz right now, the EV concept has been around for years. GM laid the groundwork for the Chevy Volt, which was introduced in December 2010, back in 1996 with the release of its EV1. Chris Paine’s 2006 documentary Who Killed the Electric Car? recounts the palpable demand for GM’s first EV and the swift opposition that led to its demise.



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