Are tumbling prices at the pump taking the share price of leading electric auto manufacturer Tesla Motors with them?
Thanks to a surge in domestic oil production, gas prices started on a decline to a four-year low in November — the same month shares of Tesla Motors began an almost 20-percent downturn, leading many on Wall Street to wonder if cheap gas is giving investors second thoughts about the market viability of $100,000 all-electric autos.
“We believe the recent decline in TSLA shares is largely driven by the concern low gasoline prices could impact demand if sustained for the long term,” Baird Equity Research analyst Ben Kallo wrote in a note to investors Monday, according to Bloomberg.
Tesla shares were on track to set a record of their own this week with a steady seven day decline that ended slightly up Tuesday but fell again in Wednesday trading, with the stock taking an almost 3-percent hit to $210.73 from its opening price at the time of this reporting. Tesla’s share price is down about 25 percent from its all-time high of $286.04 in September.
Though the timing may have a negligible short-term effect, others on Wall Street aren’t convinced the price of U.S. crude oil (which fell almost 5 percent to around $60 Wednesday) will have any impact on luxury auto buyers capable of shelling out an average $100,000 for a fossil-free ride.
Researchers at Bespoke Investment Group say that while the price of oil and Tesla shared a correlative relationship when the company went public, that correlation has dropped in the years since to around zero in recent months.
“A lot of investors think cheap oil is bad news for Tesla, but it’s not that simple,” Morningstar Inc. auto analyst David Whiston told Bloomberg. “People who are buying Tesla today don’t really care if gas is cheap or expensive. They want it because it’s a status symbol or for the performance or they are very eco-conscious and just don’t want to consume fossil fuels, regardless of what they pay for the fossil fuels.”
Despite attributing the negative impact to oil, Baird Equity Research interpreted the recent drop as an opportunity to buy for the long-term.
“We think the weakness provides a buying opportunity,” Kallo said in the investors’ note Monday. “Tesla vehicles are purchased for performance, quality, and brand, which are minimally affected by oil prices.”
Kallo noted that even at the recent record-average low pump price of $2.66, Tesla owners would still save $1,400 every year.
Others speculate the drop could be attributed to a number of other recent company setbacks, including the delay of Tesla’s third production line Model X SUV, which won’t begin shipping until the latter half of 2015. (RELATED: Tesla Expected To Miss Sales Forecasts Because Of Its Weird New Doors)
Possible shipping delays of the company’s latest Model S, the all-wheel-drive P85D, could be another reason. According to The Wall Street Journal, Tesla had to wait for new required stickers revising the car’s advertised driving range down to 242 miles, as opposed to the previous 285 — a change at least partially accounted for by new EPA measurements.
Media reports last week alleging CEO Elon Musk talked up a partnership deal with BMW that the German auto manufacturer largely dismissed could also be a factor. (RELATED: Elon Musk Talked About A Bogus BMW Deal To Give Tesla A PRD Bump)
