So here’s the good news for it Tesla (TSLA -1.40%) investors this week: Tesla reported earnings for its notoriously tough second fiscal quarter of 2022 and managed to dodge a lot of bullets. Despite struggling to keep its Chinese gigafactory open amid a COVID outbreak, global electric car sales grew 43% year over year, making more profit than most people on Wall Street expected.
But now here’s the bad news: Behind the numbers lies a disturbing story for Tesla.
Tesla’s PR Problem
Tesla rose to prominence as an electric car maker based on a 2015 report from Consumer Reports which gave the company’s Model S electric luxury sedan a perfect 100. Actually, the car scored a 103, forcing CR to revise its scoring system to fix the broken curve. Since then — well, the news wasn’t as good.
It took less than a year for CR to start souring about Tesla. By 2016, the magazine had made a complete turnaround, making Tesla one of the “least reliable” automakers on the planet. And it’s not just CR it thinks so.
In JD Power’s latest report on the initial quality of cars, released last month, the consumer insights specialist ranked Tesla at the bottom of the pack of branded automakers — seventh from last to be precise. to be. Tesla scored 226 reported problems per 100 vehicles sold, earning at least five points against JD Power’s 2021 report. Still, the company was among consistent laggards like Land Rover and Jeep — and on a par with Mitsubishi.
And then there’s GM
However, that was not the report’s biggest revelation. The real headline is that Tesla is doing a poor job at maintaining car quality – but that rival car giant General engines (GM -0.43%) does a big function.
Consider: of the top 10 best-ranked car brands covered in the report, four of them belong to GM. Cadillac was seventh, GMC was sixth, Chevrolet was number 3 — and Buick was number 1. (To wrap up the list, Stellantis‘ Dodge brand in second place, and Ford pushed to 10th place. Korea’s Genesis and Kia brands made the top five, Toyota‘s Lexus came in sixth, and BMW finished ninth.)
And that’s not all. GM’s Chevrolet Corvette claimed top honors and JD Power’s car with the highest initial quality rating. The company also won praise for its Chevrolet Malibu, Equinox, Silverado, Silverado HD and Tahoe, for the Buick Encore GX and for the Cadillac Escalade and XT6. In total, nine individual GM-produced models outperformed their market segments. GM even took home JD Power’s Platinum Award for the car factory least reported problems — GM’s San Luis-Potosi plant in Mexico.
Everything in order, Car and driver described the JD Power report as “a near-sweep of the study’s big honors” for GM, and they’re not exaggerating the matter one bit.
What it means for investors
Admittedly, this was just one report on car models produced in just one year, and these kinds of assessments can be shaken quickly. (To illustrate, as recently as 2021, just a The General Motors brand even made it to the top 10, Chevrolet). Whether GM will gain any noticeable advantage over Tesla in the battle for market share in the emerging all-important electric car market, according to this report, remains to be seen.
That said, think about it: According to JD Power, automakers in general had a difficult year in 2022, with initial production quality generally suffering from supply chain problems, high auto parts prices and also “disruption of the staff”. Still, I think it says something (good) about GM navigating this difficult environment better than most of its rivals, and better than Tesla in particular.
Conversely, I think it speaks badly of Tesla that the problems are plaguing the in the report, less came from supply chain issues and more from simple poor quality control. According to a CNBC analysis of the report, Tesla’s score was dragged down primarily by complaints about “panel alignment and poor paint quality” — basic things any auto company must do right if it hopes to maintain customer loyalty over the long term.
Long story short: Yes, the news was mostly good for Tesla this week. It was unduly affected by China’s COVID containment policy, but managed to escape the quarter largely unscathed. In the long run, though, Tesla has a lot of work to do if it wants to build and maintain a reputation for quality — and that’s good news for GM as it jumps into the electric car race.
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