AUTO STOCKS, LED BY TESLA, DROP AMIDST RUSSIAN INVASION OF UKRAINE

Last month, as Russia began its invasion of Ukraine, automaker stocks dropped precipitously. Few were as hard-hit as Wall Street Darling Tesla. As Seeking Alpha reports, Tesla’s share value plummeted more than 8 percent to $702.68 before market open – their lowest price since August of 2021. The stock has since rebounded, now trading at nearly $840 as of this writing, but it’s still nowhere near its 52-week high of $1,243.49.

Ford, GM, and Chrysler parent Stellantis all experienced dips following the Ukraine invasion, as well. But unlike Tesla, GM and Stellantis shares didn’t plummet immediately as the news broke, instead gradually drifting downward with the rest of the market as the volatile situation continues to drive more sell-offs – and as GM announced a halt to its Russia-bound exports. Ford’s initial drop in value was more sudden and dramatic, but the company’s share value has been oscillating while slowly trending back up in the time since.

Why The Low Confidence?

In a sense, it’s a bit surprising that Tesla’s share value downturn was so dramatic. The company doesn’t officially operate in either Russia or Ukraine, and the most recent estimates put the number of Teslas in Russia in the hundreds.

What’s more, it’s a safe bet that much of the current fear and pessimism driving people’s trading habits are driven by the surging price of oil, Russia being one of the world’s largest producers of crude. If there are two things that tend to drive people toward purchasing an EV, historically, they’ve been tax incentives and high prices at the pump.

The broader market decline is a bit easier to understand. Stagflation – when high inflation is met with a stagnant job market – has been a looming threat for some time, and higher prices at the pump only make the risk greater. And in response to the invasion, countries around the globe have imposed new economic sanctions on Russia, which will inevitably have knock-on effects throughout the global economy.

And humans, being not entirely rational beings, might also be motivated by a general sense of unease and uncertainty, similar to what we saw with the onset of the Covid-19 pandemic. As we said, Ukraine is a highly volatile situation, and the threat of nuclear action on the part of Russia looms.

The irony is that things are generally looking pretty good for Tesla at the moment. The EV manufacturer just got approval to build a new plant in Germany, and it’s setting up to double production capacity in China to meet growing demand.