Tesla Stock Drops. Blame GM.

Tesla Cybertrucks. Coming into Tuesday trading, the EV maker’s stock was up about 8% so far this year and up about 99% over the past 12 months. (Getty Images)

Key Points

• Tesla stock dropped 3.2% early Tuesday, influenced by General Motors’ announcement of a $1.6 billion charge for EV capacity realignment.
• General Motors cited slowing EV adoption rates due to changes in US government policy, including reduced tax incentives.
• Tesla’s stock has shown significant volatility, with an average daily movement of 2.8% over the last 30 trading sessions.

Tesla stock volatility picked up again. This time, General Motors might bear some of the blame.

Shares of the Elon Musk-led electric-vehicle maker dropped 1.5%, closing at $429.24. The S&P 500 dropped 0.2% and the Dow Jones Industrial Average added 0.4%.

There weren’t any major company announcements or Wall Street ratings changes to pin the drop on. Instead, GM announced $1.6 billion charge on Tuesday morning for “a planned strategic realignment of our EV capacity and manufacturing footprint to consumer demand.”

GM traded as low as $54.33 before rallying to close at $57.15, up 2.8%.

“Following recent U.S. Government policy changes, including the termination of certain consumer tax incentives for EV purchases and the reduction in the stringency of emissions regulations, we expect the adoption rate of EVs to slow,” reads part of the news release. That means battery plants and assembly capacity costing GM tens of billions won’t fill up as quickly as expected.

Investors, of course, already know that EV adoption has slowed in the U.S. In the second quarter, Americans bought some 311,000 all-electric cars, down almost 7% year over year. Still, the write-down is an acknowledgment that past EV spending won’t yield the once-hoped-for earnings.

The early Tuesday move in Tesla stock follows a big 5.4% gain on Monday, which wiped out a 5.1% drop on Friday—resulting from escalating trade tensions between the U.S. and China. The market rebounded on Monday, but Tesla’s stock was given an extra boost by Melius Research analyst Rob Wertheimer, who launched coverage of shares with a Buy rating and a $520 price target.

“We see Tesla shares as a must-own,” Wertheimer wrote, noting that AI will disrupt many industries. In cars, a self-driving robo-taxi could replace a household’s second car. Tesla, however, is well-positioned to capitalize on AI trends. Tesla has “a combination of tech and design/manufacturing that no one today can replicate,” the analyst noted.

Overall, 47% of analysts covering the stock rate shares Buy, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target for Tesla stock is about $367.

Investors have had to endure some big swings in Tesla stock. Over the past 30 trading sessions, Tesla stock has moved an average of about 2.8% per day, up or down. Shares have moved more than 3%, up or down, half of the time. Investors can expect some more stock volatility. Tesla reports third-quarter earnings on Oct. 22.

All the volatility has left shares in the green, though. Coming into Tuesday trading, Tesla stock was up about 8% so far this year and up about 99% over the past 12 months.

Write to Al Root at allen.root@dowjones.com