As we move into the meat of the second half of 2016 and the all-important fourth quarter, it’s worth taking a look a big business contradiction that’s currently playing out.
Check out the chart below. It summarizes the year-to-date stock performance of General Motors, Ford, Fiat Chrysler Automobiles, Ferrari, and Tesla – the major publicly traded automakers that we keep track of at Business Insider:
- Screenshot via Google Finance
Everybody except Ferrari is in the red – and Ferrari, which just began trading last year after its IPO, is just barely in positive territory.
Also, the share prices of car makers are moving in lockstep. Even Tesla, which has typically been more volatile than the others, is following the same pattern. (By the way, the reason FCA is so much lower than the rest is that its own IPO happened in early 2015, and the subsequent Ferrari IPO – Ferrari was FCA-owned – sucked considerable value out of the company.)
Meanwhile, the US auto market has been booming, setting a sales record in 2015: 17.5 million new cars and trucks rolled of dealer lots. This year, the market is running at around the same pace, although there’s widespread speculation that it’s plateaued. Ford, GM, and FCA have posted consistent profits and strong sales for years.
Carmakers’ investors weren’t rewarded much during this period, although Ford and GM have been paying dividends. And anyone who invested in Tesla, well, they knew they were in for a wile ride.
Will this story change as 2016 winds down? Probably not. Tesla’s value is anybody’s guess, but the more established automakers are already anticipating a downturn, and the market is starting to price that in. For example, Ford held an investor conference this week and announced that it would see weakening profits in 2017 as it ramps up investment.
That news didn’t affect the stock price much at all: it’s now trading at around $12 a share, a position similar to where it was at the beginning of the year when it first began to slide.