After rising 400% in the past two years, Tesla Motors Inc.’s (NASDAQ: TSLA) shares have dropped 13% in 2015. Falling oil prices and new alternative energy car competition may have hurt the company. Alternatively, the attractiveness of the Tesla brand among luxury car buyers may have begun to wane.
First among the most immediate concerns about Tesla is the drop in oil prices from $100 in June to under $50. However, this argument is preposterous because Tesla buyers spend above $70,000 for their cars (although with federal tax incentives, the figure is closer to $63,500). A Tesla buyer has an income that probably makes the price of gasoline irrelevant.
People who spend $70,000 for a Tesla can afford a new Mercedes or BMW. Bu, Tesla buyers do not want brands that have been established for decades, or ones that sell millions of cars a year. Tesla is already a collector’s car to the extent that the Tesla is both unique and extremely well built. Tesla has won several awards for being the highest quality car available in America. So, Tesla has one major factor in its favor.
Among the strikes against Tesla, as far as critics are concerned, is that larger car companies are making similar vehicles. The best example of this is the BMW i8, which is meant to compete with the new Tesla P85D super car. This new Tesla will sell for over $104,000. The BMW will sell for $136,000. And, the BMW is not a real electric car to the extent that it has a three-cylinder motor to operate in the place of the electric engine when needed.
Elon Musk, Tesla’s founder, recently said that his company will sell millions of cars a decade from now. There is already evidence that is less and less likely. China sales have faltered. Some experts believe that the number of likely buyers in the People’s Republic has fallen as novelty has worn thin. Additionally, Musk remarked that the availability of an affordable version of the Tesla may be further off that he indicated earlier.
The next two or three quarters of sales will be the key indicators of whether Tesla can continue its period of hyper growth. If the numbers show demand has slackened, the company will lose its place as a lead manufacturer of one of the cars of the future.
ALSO READ: Can BMW Sell $135,000 Electric Car?
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