Tesla Motors Inc (NASDAQ:TSLA) rose as much as 7 per cent after a sparkling report from analysts at Jefferies. They raised their estimates and almost doubled their price target for the company. In addition, they made other adjustments to their models based on several outside things the automaker has working in its favor.
Tesla Benefits From Growth In Full-Size Premium Sedan Market
First, analysts Elaine Kwei and Peter Nesvold said Tesla Motors Inc (NASDAQ:TSLA) is greatly benefiting from sales growth in the full-size premium sedan segment. They consider full-size luxury sedans to be the closest competition to the Tesla Model S, which puts the vehicle in a category with the BMW 5/7 Series, the Mercedes E/S class, the Porsche Panamera and the Audi A6/7/8.
They note that in 2012, U.S. sales of those particular vehicles included about 210,000 units or about 1.5 percent of the U.S. market. This year through May, luxury sedan sales rose 10.4 percent, and that number includes Tesla’s Model S. The analysts said if the Model S was excluded from those numbers, sales of that vehicle class would only be up .8 percent. They note that if sales of the Model S continue going at the same rate they have been this year so far, Tesla Motors Inc (NASDAQ:TSLA) will make up about 9 percent of the relevant market.
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“We think that’s a tremendous accomplishment for a new all-electric vehicle competing against some of the finest automakers in the world,” Kwei and Nesvold wrote.
Tesla And The Alternative Vehicle Market
The analysts also updated their figures for the alternative vehicle market, based on Tesla Motors Inc (NASDAQ:TSLA)’s success this year. If EV penetration is faster than previously expected, Tesla would certainly be one of the beneficiaries, and Jefferies analysts have updated their forecasts to reflect this possibility.
They note that sales of hybrid and PHEV sales has risen this year as new models have arrived on the market, including two new Prius models from Toyota Motor Corporation (NYSE:TM) and the Ford Motor Company (NYSE:F) C-Max and Fusion, which come in both plug-in and hybrid vehicles.
They said Tesla Motors Inc (NASDAQ:TSLA)’s Model S is the primary driver of year over year EV sales growth. So far this year, about 17,500 all-electric vehicles have been sold, with the Model S and the Nissan Motor Co., Ltd. (OTCMKTS:NSANY) (TYO:7201) Leaf making up the vast majority of those units. They’re now looking for PHEV / EV market penetration to be 1.1 percent or about 180,000 units by 2017 and then going up to 2.1 percent by 2020. They used a 30 percent compound annual growth rate in PHEVs / EVs through 2020, which they said is similar to the 10-uear rate of the Toyota Prius.
A Regulatory Push For Tesla
The Jefferies analysts also said the regulatory push for electric vehicles in the U.S. also heavily favors Tesla Motors Inc (NASDAQ:TSLA), which they said is the only automaker producing only zero emissions vehicles. For example, 4.5 percent of auto sales in California must be zero emissions or partial zero emissions vehicles by 2018. By 2025, the requirement goes up to 22 percent. A number of other states have similar standards, including Oregon, New York, New Jersey, Vermont, Rhode Island, Massachusetts and others.
On an international basis, they said restricted driving zones as a way to cut congestion and pollution favor EVs, so they believe Tesla Motors Inc (NASDAQ:TSLA) will also dominate the market internationally as well. In other countries, EV drivers get preferential lane access and parking in a number of urban areas.