Will Rising Gas Prices Help Tesla?

Will Rising Gas Prices Help Tesla?
<a href="https://pixabay.com/users/Blomst/">Blomst</a> / Pixabay

Tesla cars are not only efficient but environmentally-friendly too, and thus, they are a threat to vehicles running on gasoline. The cartel of oil-producing nations, OPEC, said it would cut production, and then oil prices surged by more than 9%. But, a big question here is whether rising oil and gas prices will benefit Tesla. Well, the answer is probably no, at least in the near term.

No impact on high-income buyers

High gas prices will not have any impact on high-income customers who buy Tesla cars priced as high as $75,000 or more, notes Barron’s. Tesla’s mass-market and lower-priced car, the Model 3, is still many months away from the market.

Oil prices started to decline in mid-2014, and Tesla shares too have fallen since then, with CEO Elon Musk warning that lower gas prices could make an electric car a less attractive option. Drawing a direct connection between Tesla and gas prices is still hard though because there are several other factors, such as the pace of the automaker’s production, on which the stock trades, says Barron’s.

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Whenever gas prices rise, Americans seem to choose more fuel-efficient cars. In 2012 when the gas price averaged a record $3.60 a gallon, electric vehicle sales tripled from 17,425 to 52,607, according to Inside EVs. In 2013, when gas prices were on a downswing, EV sales nearly doubled to 97,507.

The growth rate has been declining since then. Last year, sales hit 116,099, but that could have been because of price, availability and attractiveness of available models.

More competition for Tesla

In some not-so-good news for Tesla, Lucid Motors, a startup based in California, announced plans to install a car assembly plant. The plant will be operational by the end of 2018. Its assembly line will be situated in Arizona, and the company will invest $700 million.

At full capacity, the company is expected to produce 50,000 to 60,000 cars each year and will hire 2,000 employees. A few weeks ago at the Los Angeles Auto Show, Lucid showcased a 1,000-horsepower sedan.

Tesla, which is currently struggling to generate a growing revenue stream, might face tough competition from Lucid Motors. Several Chinese investors are backing this startup, notes TCC. BAIC, a major automaker in Beijing under the control of the Chinese government, is also funding Lucid Motors.

On Wednesday, Tesla shares closed down 0.09% at $189.40. Year to date, the stock is down more than 21%, while in the last six months, it is down more than 15%. The stock has a 52-week high of $269.34 and a 52-week low of $141.05.

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