Cheaper gasoline hurts Tesla Motors shares

Article by Christian Andrei, on December 10, 2014

Gasoline has been on its cheapest in over four years, and it is hurting shares at Tesla Motors. Lesser gasoline price – which according to AAA has fallen to 68 days to an average of $2.67 per gallon – may have reduced the need for electric vehicles, especially those that commands prices of $100,000 and up.

According to Lundberg Survey Inc., gasoline prices at stations in the two weeks ended Dec. 5 dropped to its lowest since September 2010. Ole Hui, an analyst at Mizuho Securities Asia Ltd. remarked the low oil prices will make people think that they can buy a conventional car, as it would be “more beneficial that way.”

He noted that there is now less incentive for customers to buy EVs. InsideEVs.com expects Tesla to report flat US sales at 1,200 Model S sedans in November. The carmaker has seen its sales in the US drop this year as it commenced exporting the Model S to other markets.

Ben Kallo, an analyst with Robert W. Baird & Co., said in a note that the decline in the company’s shares is largely driven by the concern that low fuel prices could affect demand “if sustained for the long term.”

Despite the adverse market reaction, both Kallo and InsideEVs.com suggested that Tesla’s sales would still surge, thanks to “performance, quality, and brand.”

InsideEVs.com advised against worrying too much on Tesla sales in November, as the carmaker starts rolling out all-wheel-drive versions this month.

Topics: tesla motors, shares

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