During the past year, the share price for Tesla Motors (TSLA) has climbed surely and steadily, but has hit a ceiling in the wake of recent events. The high-end electric car manufacturer has been banned from selling their cars in Texas and New Jersey, and litigation to ban the company is taking place in New York and Ohio. This could potentially put a huge dent in Tesla’s quarterly sales figures. Along with these setbacks, Tesla Motors is seeking to reduce the price tags on each model of their cars over the next 3 years.
Automobile manufacturers have pitted themselves against Tesla Motors and their sales methods. Tesla sells cars directly to customers with no dealership involved. A customer simply pays what Tesla asks for the car, and there is no bargaining process. Nobody makes a commission for the sale of a Model-S, which Tesla sells with a price tag of $69,000.
The sales dilemmas in Texas, New Jersey, New York, and Ohio have not phased Tesla Motors a bit. They are still committed to a general 3 year plan resulting in the construction and sale of over 500,000 cars per year. They project that their Model-S could be reduced in price from $69,000 down to $30,000 or $40,000. Tesla is currently negotiating with various states to construct their “Gigafactory,” a $5 billion dollar lithium-ion battery construction facility. It is estimated that Tesla Motors will use this facility to reduce the price tags of each model by dropping the unit price of each battery to less than half of the current price.
Shareholders in Tesla Motors have been reluctant to take part in the company’s enthusiasm during the first quarter of 2014. The share price has dropped 44.56 points from $265.00 down $220.44 during February and March. The consensus among shareholders seems to be that the company won’t be able to sustain their high sales figures as more states ban their direct sale method. Tesla continues to remind shareholders that they have sold every car produced so far, and they continue to project ever-increasing sales figures.
Judging from the way shareholders are handling the Tesla situation at the moment, it is probably safe to assume that the share price may wobble around for a while. The first quarter sales figures may put investors at ease, but the continued banning of all car sales in new states seems to have investors pulling their hair out. As it stands now, the “Gigafactory” is still on the drawing board, and the company’s current goal is to double their sales figures from 22,477 cars sold in 2013 to hopefully more than 40,000 in 2014.
The plan from Tesla Motors to reduce the price tags on their cars over the next 3 years may not garner any enthusiasm from investors. As the car maker reduces prices and more states ban car sales, investors see a trend that may drastically reduce revenue. Tesla may have lofty goals of mass-production, but there is little evidence to suggest that they will get there. To top things off, the car company does not seem to be properly dealing with the sales bans in New Jersey and Texas. It looks like the downtrend in share price may continue into the second quarter of 2014.
By Luke Sargent