The collapse of the Tesla Motors Inc. (NASDAQ: TSLA) share price continued throughout the week as it approached a 52-week low. Concerns about margins, the rate of sales increases and trouble in China have hammered that stock, and the pounding could continue.
Tesla has traded in a range of $291.42 to $177.22. Friday, it traded as low as $181.40. Just this year it has tumbled 17%, against an improvement of 3% in the S&P 500.
The most recent bad news from the electric car company is that sales in the critical China market fell in February. According to The Wall Street Journal:
Recently released data from investment research firm JL Warren Capital LLC, which looks at license plate registrations, showed 260 Tesla Model S cars were registered in February, down from 469 in January.
That is only the tip of a melting iceberg.
While Tesla has championed the electric car model, and it has even arranged so that its vehicles will be always within range of a charging station, primary among concerns about its future is competition, particularly at the low end of the price market. Tesla has promised a car that will retail for about half of the $70,000 it charges for its Model S. However, that day apparently is years away. In the meantime, companies from BMW to General Motors Co. (NYSE: GM) have released, or plan to release, what they define as electric cars of their own, although some have tiny gasoline engines to extend their ranges. It is too early to know if the consumer cares whether a car is purely all-electric.
Tesla’s other major advantage has been an unmatched level of quality. Research firms from Consumer Reports to J.D. Power have praised its manufacturing, safety and bevy of features. However, the consumer may think cars that are excellent but not perfect are good enough. Luxury brands such as Lexus are rated nearly as well. Some have huge dealer networks and remarkably large marketing budgets. Lexus makes several hybrids, too. It remains unclear whether hybrid engines are “good enough” for consumers who want cars that are fuel efficient and therefore “green.”
Tesla founder Elon Musk, like other entrepreneurs, may have created a product that is so good that the rest of the auto industry has set plans for direct competition within a few years, or less. Profit margins are not at the core of Tesla’s problem. The pursuit of its success is.
Sponsored: Tips for Investing
A financial advisor can help you understand the advantages and disadvantages of investment properties. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Investing in real estate can diversify your portfolio. But expanding your horizons may add additional costs. If you’re an investor looking to minimize expenses, consider checking out online brokerages. They often offer low investment fees, helping you maximize your profit.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.