Understanding the Impact of Tesla Motor Shares on the Dow Jones Industrial Average
The Dow Jones Industrial Average (DJIA) is one of the most widely followed stock market indices in the world. It tracks the performance of 30 large, publicly-owned companies based in the United States. Tesla Inc., a leading electric vehicle and clean energy company, has been making waves in the stock market with its impressive performance. This article explores how Tesla’s motor shares impact the DJIA.
What is the Dow Jones Industrial Average?
The DJIA, often referred to as “the Dow,” is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange (NYSE) and the NASDAQ. The DJIA was invented by Charles Dow in 1896. It is the second-oldest U.S. market index, after the Dow Jones Transportation Average, which Dow also created.
The DJIA represents about a quarter of the value of the entire U.S. stock market, but a percent change in the Dow should not be interpreted as a definite indication that the entire market has dropped by the same percent. It’s a useful benchmark for the U.S. stock market since it includes both the industrial and transportation sectors.
What is Tesla Inc.?
Tesla Inc. is an American electric vehicle and clean energy company founded in 2003. The company specializes in electric vehicle manufacturing, battery energy storage from home to grid scale, and, through its acquisition of SolarCity, solar energy services. Tesla’s CEO, Elon Musk, has played a significant role in the company’s rise as a dominant player in the electric vehicle market.
How Tesla Motor Shares Impact the Dow Jones Industrial Average
As of now, Tesla is not included in the DJIA. This is because the Dow is a price-weighted index, meaning companies with higher stock prices have a larger impact on the Dow’s movements. Tesla’s share price is significantly higher than most other companies, and including it in the Dow would significantly skew the index.
However, Tesla’s performance can indirectly impact the DJIA. Tesla’s success has a ripple effect on the entire automotive industry, pushing other automakers to invest in electric vehicle technology. Several companies included in the DJIA, such as General Motors and Apple (which is rumored to be entering the electric vehicle market), are influenced by Tesla’s performance. If Tesla’s success prompts these companies to perform better, it could indirectly boost the DJIA.
Moreover, Tesla’s performance can influence investor sentiment about the stock market as a whole. If Tesla performs well, it can boost investor confidence, potentially leading to more investment in the stock market, including stocks within the DJIA.
The Future of Tesla and the DJIA
While Tesla is not currently included in the DJIA, it is not out of the question that it could be in the future. The decision to include a company in the DJIA is made by the editors of The Wall Street Journal. There is no set schedule for when changes to the DJIA are made, as changes are typically only made when a company is no longer appropriate for the index.
If Tesla were to be included in the DJIA in the future, it would likely have a significant impact on the index due to its high share price. However, it’s also possible that the DJIA could be adjusted to account for Tesla’s high share price, as was done when Apple was added to the index.
In conclusion, while Tesla’s motor shares do not directly impact the DJIA, they can have an indirect influence through their effect on other companies and overall investor sentiment. As the electric vehicle market continues to grow, the impact of Tesla on the stock market is likely to increase. Whether or not Tesla will be included in the DJIA in the future remains to be seen.
