Are Low Gas Prices Reducing Demand for Tesla?

As oil prices sit at monthly lows and are expected to remain low throughout the winter months, electric and hybrid cars are seeing low sales – that is, electric and hybrid vehicles not considered luxurious. Though Tesla stocks have seen a recent dip, analysts do not believe the decline to be linked to low gas prices. While the (high) cost of gas may be a motivational factor behind many drivers switching to electric vehicles, Tesla’s luxurious reputation and high vehicle prices make gas prices less of a factor in the decision of a driver to purchase a vehicle that can cost over $100,000.

David Whiston, analyst at Morningstar Inc., says as quoted by a Bloomberg article,

A lot of investors think cheap oil is bad news for Tesla, but it’s not that simple… People who are buying Tesla today don’t really care if gas is cheap or expensive. They want it because it’s a status symbol or for the performance or they are very eco-conscious and just don’t want to consume fossil fuels, regardless of what they pay for the fossil fuels.”

However, this being said, low oil prices may prove to be a problem in the future for Tesla Motors as the company attempts to expand their vehicle line to include lower cost vehicles for the mass market. The Toyota Motor Corp. Prius sales fell by 13 percent last month and are down by 12 percent overall this year reflecting the four and a half-year low in gas prices. Furthermore, the Nissan Leaf and GM Chevrolet Volt both saw declines in sales for November.

Whiston continued,

[Cheap gas] could create a problem for Tesla once it gets out of the vehicle segments that cater to the very wealthy and get down to the people who might normally buy a compact sedan like a Honda Civic. Those are the people who care about the price of gas.”

For now, Tesla stocks are expected to rebound. Analysts suggest continued gas price lows will likely reduce consumer motivation to buy electric and/or hybrid vehicles, however for the eco-conscious, gas prices will not be the deciding factor.

 

Read more here- “Tesla Rebounds as Shopers Seen Looking Past Price at Pump,” (Keith Naughton, Bloomberg)

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Olivia is a graduate of Villanova University where she studied Economics and History, minoring in Gender and Women's Studies. She also has experience working with federal legislatures on health care policy, women's issues, and Internet safety.

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