Tesla Motors’ (NASDAQ:TSLA) shares tumbled by over 13% in 2015 after rallying 400% in the past two years. Factors such as falling oil prices and new alternative energy car competition have likely caused shares to drop. One more probable reason could be the losing sheen of the Tesla brand among luxury car buyers.
Factors contributing to the decline
According to critics, other automobile juggernauts are also making electric vehicles similar to Tesla, and the best example for this is the Bayerische Motoren Werke AG i8, which is expected to give competition to the new Tesla P85D super car, which is priced at $104,000, compared to BMW’s $136,000. Also BMW’s vehicle cannot be tagged as a fully electric car because it has a three cylinder motor to operate in the place of the electric engine when needed.
Tesla Motors CEO Elon Musk mentioned that the company expects to sell millions of cars a decade from now, a milestone that looks hard to achieve anytime soon. Sales in China are below expectations, and experts believe there is a significant drop of Tesla buyers in China because as the concept is no more new. Also a Tesla car for the masses is not yet on the market.
Falling gas price argument does not hold for Tesla
Oil prices are in a reverse loop, dropping from $100 in June to under $50, which is a major drawback for the EV manufacturer. But this cannot be taken as the primary argument for Tesla’s dropping share price, considering the fact that a Tesla buyer shells out over $70,000 for the automaker’s cars. This implies that the income group that buys Model S sedans has nothing to do with the falling price of gasoline. Buyers who can afford Tesla’s Model S can also buy a Mercedes or BMW. However, Tesla fans do not want a brand that has held its supremacy for decades and sells millions of cars every year, says the report.
The build and distinctiveness of Tesla Motors makes it a collector’s car. The company has earned several awards for being the highest quality car available in America, which works very well in the favor of the company, says the report. It will be crystal clear in the next two or three quarters if Tesla Motors can continue to be in the upper echelons of growth. If sales indicate demand is going down, then the company will lose its place as the lead manufacturer of one of the cars of the future.