Why Tesla Stock Tumbled Today
What happened
Tesla (NASDAQ: TSLA) had a forgettable Tuesday as far as its stock was concerned. The high-profile electric vehicle (EV) maker saw its share price dip by nearly 3%, a steeper fall than the S&P 500 index's 0.7% decline. It seems the company is about to get some heavy competition in one of its major side hustles.
So what
This morning, Reuters reported that General Motors (NYSE: GM) is forming a new business concentrating on energy-storage and management services. This division, GM Energy, puts the automaker on a direct competitive collision course with Tesla, which has had high hopes for its Tesla Energy unit.
GM Energy is to be formed by General Motors' existing Ultium Charge 360 charging service combining with a pair of new and related businesses, Ultium Home and Ultium Commercial. When this occurs, GM Energy will sell a range of energy products and services, including batteries, hydrogen fuel cells, and even solar panels.
GM is apparently relishing the coming battle for market share in this segment with its trendy rival. Reuters quoted the company's vice president for EV growth operations Travis Hester as saying, "Our competition in this space on the [automaker] side is really only Tesla, which is a strong energy management company."
Now what
Energy generation and storage is a relatively small part of Tesla's business. In the company's second quarter, for example, it brought in $866 million out of nearly $12 billion in total revenue. Still, the entry of a large, wealthy, and clearly determined competitor represents a threat, and energy is a business with much potential. The investor reaction to the news on Tuesday, then, was certainly understandable.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
