Higher U.S. EV Sales To Drive Tesla Stock

  • Electric Vehicle (EV) sales in the U.S. have trended higher during the first two months of the year.
  • Tesla sales are significantly higher as well, courtesy the Model X.
  • A healthy EV industry is a positive for Tesla as it looks to launch Model 3 in two weeks' time.

Tesla (NASDAQ:TSLA) shares have rallied more than 10% over the past five days after a bullish report about the state of the EV industry in 2016 emerged. According to InsideEVs.com, plug-in sales in the U.S. during the first two months of the year were up 8.9% to 14,172 units compared to the same period a year ago. 2015 was a bad year for the EV industry with many manufacturers recording double-digit sales declines. EV sales were almost flat in January 2015 and declined year-over-year during the month of February.

Hybrid sales, however, declined 13% to 45,338 units. The entire auto industry in the U.S. seems to be doing well with sales during the first two months of the year climbing 3.5% Y/Y to 2.492M vehicles. This trend of falling hybrid sales appears to vindicate Tesla CEO Elon Musk who has always insisted that pure electric cars and not hybrids are the future of the industry. Traditional automakers have mostly favored the hybrid approach.

Tesla 5-Day Share Returns


Source: CNN Money

InsideEVs.com estimates that Tesla sold 2,400 Model S units during the first two months of 2016 compared to 2,150 units during the same period last year. Meanwhile, the site estimates that Tesla sold 770 Model X units during the first two months of the year making it the 6th best-selling EV Model in the country. The combined sales of Model S and Model X means that Tesla’s sales for the first two months are 47.4% higher compared to 2016. In real dollar terms, however, Tesla is estimated to have realized revenue ~55% higher for the period since Model X sports an Average Selling Price (ASP) about $10k higher than Model S.

2015 was the first year when the EV industry recorded year-over-year sales declines. Low oil prices were to blame as they acted as a disincentive for people to switch to alternative fuels. But oil prices have seen a sustained rally with Brent Crude having recently crossed the $40/barrel mark for the first time in three months. The rally is being fuelled by optimism after 15 major oil producers agreed to meet in Doha in about a month’s time to discuss the possibility of freezing supplies around January 2016 levels.


Source: NASDAQ

While Tesla sales during the first two months of the year might seem low, investors should bear in mind that EV sales are typically lowest in January and February before picking up during the warmer months.


Source: InsideEVs.com

Other than rising oil prices, anticipation of the arrival of the first mass-produced EVs is also helping. General Motors (NYSE:GM) plans to unveil the Chevy Bolt, the first mass-market EV, during the fourth quarter. The Bolt will feature impressive specs such as 200Hp and sub 7-second acceleration as well as a 200-mile driving range. GM expects to sell the Bolt for $30k.

Meanwhile, Tesla will unveil the Model 3, its first mass-market EV, on March 31 and start delivery in late 2017. Tesla will sell the EV at $35k. Details about Model 3 specs are scant, though the car is expected to be similar in size to the BMW 3 Series. With the Model 3, Tesla will buck the trend where it usually launches the pricier Signature Series before moving down the ladder. Tesla says it will not offer a Signature Series with Model 3 but will instead start with a base vehicle before later offering higher trim levels and additional options. This should certainly help the company achieve its goal of keeping the price of Model 3 at $35k.

Tesla has been amazingly resistant to the ongoing oil carnage and saw its unit sales jump more than 40% in 2015 when nearly everybody else posted precipitous declines. That’s a true testament to the strength of the brand. An environment where EV sales for the entire industry are rising is a positive for Tesla because a rising tide lifts all boats. Perhaps investors will be checking closely to see how GM’s Bolt performs in the markets to know what to expect when the Model 3 arrives. Ironically, the enigma surrounding Model 3 could very well depress Bolt sales since many people might prefer to put up the extra $5k for a more luxurious package.

Brian Wu Brian Wu   on Amigobulls :
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