Can Tesla Motors (TSLA) survive falling gas prices?
MarketWatch columnist Brett Arends weighs in on the topic today, as the shares of the electric car maker fell 3% in recent trading to $215.78. He writes:
Maybe people are still going to line up to pay $70,000 for one of his fancy new battery-powered Tesla S models. But it was a lot easier to sell the concept when gasoline was $3.70 a gallon than it is at $2.25.
More than a dozen Wall Street analysts rate Tesla a Buy. Yet the stock has dropped 26% since hitting a 52-week intraday high above $291 in early September. According to data compiled by Edmunds, the auto market research company, sales of light trucks are suddenly booming again, while sales of hybrids, electrics and other fuel-efficient vehicles have tanked, falling in May through November from 4.1% of the market to just 3.2%.
As Arends writes:
Whether this is enough to run Tesla off the road is another matter. Personally I'd avoid any stock this popular and universally loved, but that may be just because I'm ornery and I don't like crowds. Car fans seem to like the Tesla vehicles, and Musk knows how to market. (A couple of years ago, while strolling through midtown Manhattan, I came across a crowd of New Yorkers gawking and oohing and aahing over a parked car—an early model Tesla.)
It is an open question whether the recent collapse in oil prices is going to be a short-term thing or part of another long bear market, like the one we saw during the 1980s and 1990s.
But one thing that ought to be bullish for gasoline—and hence for Tesla—is that every time oil prices fall people just go out and waste it some more. Gasoline prices are down over six months, and already U.S. car buyers are shunning fuel-efficient vehicles and buying themselves a new SUV. When enough do that, gasoline consumption goes back up, and so do prices.