Tesla is an overvalued product that causes greater risk within the entire automotive industry, according to an investment fund that finances tech groups that fight climate change.
Tesla’s 60 percent share rise and inability to turn a profit during this past year has roiled traditional automakers and created greater risk for all manufacturers, a report from Nordea Global Climate and Environmental Fund notes.
“We don’t see upside,” Thomas Sørensen, who manages the fund, told Bloomberg in a Sept. 28 interview. “What’s needed in cash flow generation to get to the current valuation — we don’t see that happening.”
Tesla has generated a slew of enthusiasm for climate-friendly products and services, which is making it difficult for investors to value all the wave of new technologies. Some of the products could hold value while others might prove useless.
“It’s going to be a race to the bottom for the whole industry,” he said. “In this big transition period, it’s very tough to point out the winners and the overall profitability of the sector. The risks are too high.”
Nordea’s $390-million fund once owned Tesla shares but now backs suppliers. Sørensen, whose group monitors stock and portfolio risk to safeguard green companies, believes that the type of technologies Tesla helped create have now made their way throughout the entire automotive industry.
“It’s not a niche anymore,” he said. “It’s very broad-based. Many of these solutions have now reached the famous inflection point where the adoption starts to accelerate.”
Wall Street investors have become more skeptical recently about Tesla’s financial health, especially after the Silicon Valley company dabbled in the junk bond market earlier this year.
Tesla’s bond prices initially fell 2 percent after the electric vehicle maker debuted in the junk-bond market in early August, which is relegated to companies with poor credit.
Investors believe the initial price stumble tarnished Tesla’s already battered financial image. Tesla hopes the Model 3, which debuted at the end of July, becomes a trendsetting and profitable vehicle capable of justifying the debt sell.
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