It has been an up and down year for Tesla Motors Inc, and perhaps this is to be expected given the new and relatively volatile niche within which the electric car manufacturer operates. But even if it wasn’t a year of unbridled success, with the company stock price having fallen significantly over the latter months of the year from a high in the fall, the overall trend for the company was nonetheless undoubtedly upward and positive over the last 12 months.
One would think that it in such a context that there would be a general enthusiasm about Tesla’s prospects. But the company continues to divide opinions like no other, and the outlook for Tesla in 2015 verges from the encouraging to the dismal depending on who you listen to.
Gates Capital Management's ECF Value Funds have a fantastic track record. The funds (full-name Excess Cash Flow Value Funds), which invest in an event-driven equity and credit strategy, have produced a 12.6% annualised return over the past 26 years. The funds added 7.7% overall in the second half of 2022, outperforming the 3.4% return for Read More
Tesla – Broken promises
Perhaps to some degree Tesla hasn’t helped itself. It has been noted that the hierarchy of the company, particularly the CEO Elon Musk, has been guilty of making promises that it has been unable to deliver on several occasions. Central to this has been battery-swapping power stations which Tesla has strongly mooted, but which have yet to materialise. Other Tesla products have also failed to be unveiled on schedule, and the company has to some extent had to deal with a perception of its products being subjected to lengthy and worrying delays.
Fans of Tesla would doubtless respond to this by stating that the company is attempting to do things which have never been achieved before. Surely it is reasonable in such an industry and marketplace to expect delays on occasion. But this won’t necessarily save Tesla in the ultra-competitive auto market, and there is definitely a pressing need for Tesla to deliver on new product lines in 2015.
Tesla Model X crucial
As such, the expected release of the long awaited Model X in 2015 will be absolutely critical to Tesla’s prospects. Musk has proclaimed this vehicle to be extremely impressive, and Tesla has certainly been able to attract a large number of pre-orders for this car. The Model X really needs to come to fruition in 2015 and achieve a strong critical and commercial response when it does.
However, after experiencing a relatively easy critical ride compared to some companies, perhaps motivated by the fact that the ethos and key products at Teslac are to some degree admirable, analysts have been putting the boot into the electric car manufacturer in recent weeks.
Market scepticism and gas prices
Morgan Stanley’s lead automotive analyst, Adam Jonas, has seriously questioned the company’s stated goal of producing 500,000 cars by the year 2020. Jonas is apparently skeptical about the ability of Tesla to mass produce any of its vehicle models at such an affordable rate that less affluent customers will be able to afford them. He also perceives that competition from more efficient gas-powered vehicles could cause Tesla significant difficulties.
Competition from gas-driven vehicles is certainly a thorny issue for Tesla at present. With oil prices having tumbled recently, the cost of gas at the pumps has similarly depreciated, meaning one of the key advantages of the electric car, its economic viability, has been dented. Several Wall Street analysts have suggested that if gas prices remain low, Tesla will struggle to attract custom.
This has to some extent been supported by industry figures, which suggest that the sale of hybrid and electric vehicles has fallen significantly in recent months. From May through November, they represented just 3.2 percent of the overall auto marketplace, which is a fall from the 4.1 percent rate which they represented previously. Conversely, trucks, vans and SUVs in November accounted for 55 percent of the market, which is the highest market share that these gas-guzzling vehicles have achieved since 2011.
Such factors have led some analysts to suggest that Tesla stock should be sold in 2015; a stark contrast from the previous perception of the company which was largely positive. The stock analyst Lawrence Meyers has suggested that Tesla is still facing fundamental problems with its electric cart range which have scuppered previous attempts to establish these greener vehicles in the American and worldwide auto marketplace.
The high cost of Tesla vehicles has proved prohibitive for some motorists, and although this is offset by the lack of money which needs to be invested in them in terms of gasoline, this is naturally negated when gas prices are low. Additionally, electric cars still have relatively short driving range, and refuelling times associated with them remain long. Meyers believes that the ability of Tesla to maintain its stock price will be dependent on whether or not it can produce a $35,000 vehicle of satisfactory quality.
Tesla Motors – Green ethos quandary
But this is where the divisive nature of Tesla comes in. Without doubt, there is huge potential in the electric car marketplace, not least due to the fact that gasoline-driven engines do not fit in with the green ethos of the 21st century. The cleaner motoring that electric cars promise must surely have significant growth potential, even though there are unquestionably logistical barriers which Tesla must still hurdle.
It is this context which has led 13 Wall Street analysts to rate the supercharged electric car stock a “buy” or a “strong buy”, according to a survey carried out by Thomson Reuters. To put this into its true context, Thomson Reuters could only find one solitary individual who believed that Tesla stock would underperform. No-one surveyed recommended that shareholders should sell the stock.
Tesla has already been stratospherically successful given that no solely electric car manufacturing company has ever previously experienced significant success. The achievements of the company must not be forgotten, not dismissed likely, and must be understood in their proper context. Tesla was never likely to experience anything other than a somewhat bumpy ride, and the company still has massive potential in 2015 if it is able to deliver a truly world-class vehicle with the Model X and address some of the other issues which plague investor perceptions.