(Bloomberg) -- Heading into a day that should be cause for celebration, with Tesla Inc.'s first Model 3 sedan rolling off the assembly line, Elon Musk's electric-car maker has watched $12 billion in stock-market value slip away.
Most of the drop since the June 23 peak of almost $63 billion occurred just this week. Underwhelming quarterly sales released Monday showed a plateau in demand for the high-priced Model S and Model X vehicles ahead of the debut of Tesla's cheaper sedan. When paired with Volvo Car Group's vow to electrify its lineup in the coming years, investors demonstrated their concern both about execution and competitive risk.
“Tesla still faces a lot of challenges,” said Michelle Krebs, a senior analyst at Autotrader. “Tesla needs to focus on quality over speed as they ramp up the Model 3. The Volvo announcement drove home the fact that Tesla is going to face more competition. Tesla is no longer going to own electric vehicle territory exclusively, and traditional automakers really know how to crank out the cars.”
The Model 3 is the linchpin to Musk's growth ambitions. Becoming more of a mass-market carmaker will require overcoming the routine manufacturing issues that have handicapped output of the Model X at a time when American consumers are hungry for sport utility vehicles. So-called legacy automakers also won't go down without a fight -- Volvo this week said it'll have five electric models in its lineup by 2021 and that all of its new models will have hybrid or fully electric powertrains from 2019.
Tesla's 12 percent drop over the last two days has cost the company its position as the biggest U.S. automaker by stock-market capitalization. Its value has slipped to $50.74 billion, about $1.9 billion behind General Motors Co.
--With assistance from Esha Dey
To contact the reporter on this story: Dana Hull in San Francisco at dhull12@bloomberg.net.
To contact the editors responsible for this story: Craig Trudell at ctrudell1@bloomberg.net, Kevin Miller
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