What happened
The stock market was in the red again Friday. The S&P 500 ended the trading day down by 0.8% and the Nasdaq was off by 1.7%.
Car stocks, in particular, took it on the chin during the session, with Chinese electric car-maker Nio (NIO -0.36%) losing 6.2%, Ford Motor Co. (F -0.48%) down 4.2%, and General Motors (GM 0.43%) losing 5.6%.
Image source: Getty Images.
So what
There was no obvious bad news regarding any of those automakers directly on Friday -- no analyst downgrades, no price target cuts, and no negative press releases from the companies themselves. What there was, though, was good news for another car company -- and that may have affected how traders viewed its rivals.
The recipient of that good news: Tesla (TSLA 0.66%).
As Reuters reported, officials from the German state of Brandenburg held a news conference Friday at which they announced they were giving Tesla conditional approval to open its $5.5 billion car gigafactory in Berlin. Tesla, says Reuters, is depending on this factory "to vanquish European market leader Volkswagen."
Whether or not Tesla succeeds in conquering the legacy giant, however, when this factory is running at full steam, it will boost Tesla's global production capacity by 500,000 electric cars per year. That will obviously give the EV maker another leg up as it competes with Nio, Ford, and GM.
Now what
Yet does this news really justify slashing upwards of $8 billion in combined market capitalization from Nio, Ford, and GM?
I'm not sure it does.
For one thing, it's not as if Friday's announcement came as a surprise. Tesla announced its plan to open a gigafactory in Germany way back in 2019, so investors have had plenty of time to prepare for the news. Also, as Reuters points out, "Friday's 536-page conditional building permit for Tesla does not mean the U.S.-based EV pioneer can start production right away. It must first prove that it [fulfills] numerous conditions, including in water use and air pollution control." And even after the factory is brought online, Tesla will need time to ramp up to full production.
For that matter, even if it's true that Nio, Ford, and GM will soon face more intense competition from Tesla, another of their putative rivals -- electric truck start-up Rivian (RIVN 2.44%), is facing new difficulties. A series of unforced errors by Rivian this week -- publicly raising prices on trucks folks had already pre-ordered, then just as publicly backtracking -- has left car buyers and car investors alike questioning whether Rivian really knows what it's doing.
At the very worst, I'd say that Friday was a "bad news, good news" kind of a day for the car companies that compete with Tesla and Rivian. The fact that their stocks fell across the board seems unreasonable to me.
