In the last year, stock prices for a car company have nearly doubled. This company is not one of Detroit, Michigan’s big three, nor is it one of the many car companies that the United States imports from Japan or Germany that have been trading for many years. No, this company has been only been trading for eight years, and has the potential to completely change the dynamic of the electric vs. petroleum debate that is being held. This company is known as Tesla.
Named for the famous Serbian scientist, Nikola Tesla, the Tesla Motors Inc. has developed a line of luxury cars that run purely on electricity. The premier line, the S series, compares favorably with the more well known Mercedes and BMW car companies, and has received the highest rating ever given to a car by Motor Trend, at 99 points out of a possible 100.
There are many reasons for stock in this company to have soared in recent years, topping at over $200 (USD) in December, 2014, and they are as varied as they are numerous. First of all, there is a growing trend amongst consumers to purchase “green” products and services. Tesla meets this demand head on by producing cars that run purely on electricity. Another contributing factor is the cost of oil. While gasoline costs in the U.S. have dropped steadily in recent months to less than $2 per gallon in many locations, the cost of petroleum fuel overseas remains high, remaining higher than $8 in certain European countries, despite the Euro’s declining value. This of course is caused by the fact that the demand for petroleum in Europe remains high, despite the low production (if any) of oil in the same countries, leading to an inflated market, which causes consumers to purchase vehicles with much lower operating costs (ie-less dependence on oil products).
While it is true that Tesla (Nasdaq TSLA) stock prices have dropped dramatically in recent weeks, due to the lower cost of gasoline in the U.S., they are still 85% higher than they were at this time last year, and have more than tripled since the company went to public trading in 2007. Although there is certainly some risk involved with investing in Tesla (as with any stock), the wise trade will look at three factors before completely ignoring this company moving forward. First of all, while oil prices in the U.S. have dropped, the demand for “green” vehicles is going to remain high because of the growing awareness of climate change. Secondly, overseas consumers do not have the benefit of the same low gas prices as Americans. Finally, Tesla produces amazing vehicles, not just amazing electric vehicles, and there will always be a market for well made luxury cars that are fun to drive. All this, combined with the recent dip in stock prices, makes now the perfect time to buy Tesla stock, assuming of course that the investor can afford the $193 price tag per share.