Tesla is getting close to bear market territory

Tesla has long seemed immune to traditional measures of a company’s value, but increased competition and a disappointing crash rating may be bringing the company back down to Earth.

Tesla was trading 3.21% lower in premarket trading on Thursday. Shares are down 1bout 18% from their June 23 high of $US386.99.

The electric car marker is looking at another day of selling after falling short of the highest crash test rating by the Insurance Institute for Highway Safety.

Thursday’s selling makes for Tesla’s sixth decline in eight sessions and the largest slide this year.

Some investors don’t understand Tesla’s huge valuation, currently $US57.81 billion. It’s above most traditional car makers like GM and Ford, even as the company, until the Model 3, has only sold luxury vehicles in small volumes.

Even CEO Elon Musk has called his company’s valuation into question. Back in May, he told The Guardian, “I do believe this market cap is higher than we have any right to deserve.”

Some of those traditional car makers are ramping up their electric car offerings. Volvo announced on Wednesday that all of its cars produced during and after 2019 will be either fully electric or hybrid. Additionally, Jaguar is set to release its first electric SUV, a direct competitor to Tesla’s Model X, in 2018.

Many traditional car companies are also working on their self-driving car technologies, all of which means increased competition to Tesla’s previously unchallenged business model.

In addition to the increased competition, Goldman Sachs sees production levels plateauing at Tesla, which lead the firm to a downgrade on Wednesday. Goldman has been bearish on Tesla for a while and lowered its price target from $US190 to $US180, both of which are much lower than Tesla’s current price of $US316.59.

Tesla’s stock has risen 47.47% this year, including Thursday’s premarket drop.

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