Tesla Inc (NASDAQ:TSLA) shareholders have had a great couple of years as TSLA stock has recovered from a mid-February 2016 multi-year low, gaining 123% to new highs in the process. But is it all coming to an end?
As evidenced by just-released electric vehicle sales for the month of August, TSLA can no longer claim leadership position in the electric car market it created. There are now concerns that the 15-year old California-based electric car maker, which has surpassed Detroit-based automakers General Motors Company (NYSE:GM) and Ford Motor Company (NYSE:F) in market cap, stands to lose much more of its value in the quarters ahead.
Electrifying Auto Sales for August
The good news is that the market for electric vehicles continue to grow as evidenced by the increase in unit sales for the month of August. Unfortunately, sales trends also show that TSLA, which just released its highly-anticipated Model 3 car — built for mass production — is being outpaced by GM’s all-electric Chevy Bolt, which sold a record 2,107 units in the U.S. market during August, a 7% jump from the previous month.
TSLA, on the other hand, sold only 75 Model 3 cars, according to InsideEVs, which tracks electric vehicle sales. It was the sixth-consecutive month that Bolt sales topped TSLA, with GM moving 11,670 cars off the lot so far this year.
Sure, Tesla has hundreds of thousands of pre-orders. But those pre-orders actually have been seeing cancellations. And previous production problems at Tesla are well-documented.
But it matters.
There were several factors in place for the gap, not the least of which is the fact that August was the first month that the Chevy Bolt — first launched last year — was available nationwide. But it’s also possible that electric vehicle enthusiasts are comparing vehicle specs and realizing that the Bolt — which Consumer Reports notes has a driving range of 238 miles on a single charge (above the Model 3’s 220 miles) — offers more value.
“Of course, no car is chosen for its range alone,” noted the publication. “The Bolt EV did so well in CR’s testing that this recommended vehicle now ranks No. 2 among all-electric vehicles, trailing only the far more-expensive Tesla Model S. The Bolt gets good marks for range (of course), agility, and its quiet cabin.”
In other words, there’s an appetite for electric vehicles. And despite Tesla’s premium price tag and luxury status, both sales trends and vehicle specifications/features suggests that customers who are looking for an all-electric vehicle will automatically default to Tesla, especially since the Model 3 will be priced comparatively with the Chevy Bolt.
And what should TSLA stock investors make of this? That’s where faith placed in Tesla CEO Elon Musk and his ability to execute on the company’s production promises becomes even more important.
How TSLA Can Distance Itself
More than half a million customers have already pre-ordered the Model 3, ponying up $1,000 cash just to hold their place in line. The Model 3 will costs $35,000 for the basic model, but could also come as cheap as $27,500 when factoring the $7,500 federal electric car tax credit each customer could receive. And this tax credit can potentially drive even higher sales for Tesla, which plans to produce 5,000 vehicles per week at some point in 2017. And the company insisted it could double that rate in 2018.
What’s more, Musk sees Tesla’s production levels hitting 500,000 cars per year in the next two years. In other words, it’s not yet time to waive the checkered flag to the Chevy Bolt. And here’s the thing: Even as the Chevy Bolt — once available in just 20 of the nations’s largest states — became available nationwide, sales growth has stalled, and slipped into reverse, falling from 20% in July to 7% in August. This suggests that it’s possible consumers who are in the market for an electric vehicle are waiting on a Model 3.
Bottom Line for TSLA Stock
The first half of the year was good for TSLA stock, which soared almost 70%, crushing the single-digit rise in the S&P 500 Index. Assuming Tesla, which continues to draw criticism for its high cash burn, can produce the vehicles at or below budget, TSLA stock can reach $400 — 10%-plus upside — by the end of the year.
As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.