The stock value of Tesla Motors (NASDAQ:TSLA) is too high compared with other major car manufacturers such as BMW, according to Jim Chanos, a well-known short-seller, founder and president of Kynikos Associates.
During an interview with Bloomberg on Monday, Mr. Chanos said, “It’s an overpriced car company.”
He noted that BMW sold around 2,000 electric cars—the plug-in hybrid BMW—in the United States, similar to what Tesla did. He added that BMW is claiming that almost is entire fleet will become electric by 2025.
Tesla needs huge capital investment to become a mass-market automaker
Mr. Chanos emphasized that Tesla has innovation, but other automakers are already catching up. According to him, “Becoming a car manufacturer is harder than being a tech darling.” He added, “The reality is returns are relatively low in the car business and very capital intensive.”
One of the challenges confronting Tesla is to increase its sales from 50,000 cars a year to 500,000 or two million cars over the next few years.
In a separate interview last week, Mr. Chanos explained that he is shorting the shares of Tesla because he believes that it would be very difficult for Tesla to transform itself from a small, boutique, elite care manufacturer that sells expensive cars into a mass-market auto-manufacturing company. He acknowledged that Tesla has a great product, but pointed out that it is a “small business.”
Mr. Chanos also emphasized that Tesla needs a lot of capital investment to become a mass market automaker and to compete with the major players in the industry such as BMW and General Motors Company (NYSE:GM).
Tesla stock performance
The stock price of Tesla declined more than 2% to $215.58 per share due to Mr. Chanos’ bearish comments, which followed a five-day losing streak for the American electric car manufacturer.
In fact, since the launching of the Model X SUV on September 29, Tesla lost around 4 billion in market value. The company has approximately $28.64 billion market capitalization as of Monday, October 12.
Aside from Mr. Chanos some analysts released bearish reports on Tesla after the Model X debut, which is more expensive with starting price of $132,000 than the Model S a base cash price of $70,000 to $75,000.
Barclays analyst Brian Johnson recently stated, “While the bulls believe Tesla will be the next Ford, we see many challenges ahead for Tesla and argue the “crossing the chasm” is harder than it looks.” He reduced his price target on the automaker’s stock to $180 per share.