Long Tesla Stock? Electric Vehicle Sales on Course to Overtake Fossil Cars

May 21, 2020 1:36 PM UTC
The annual electric vehicle outlook report has found that combustion vehicle sales have peaked, providing good news for Tesla's stock.
  • Bloomberg’s annual electric vehicle outlook report has found that combustion vehicle sales peaked in 2017 and that electric vehicle sales will become dominant from 2037.
  • Tesla stock is well-positioned to benefit from this trend, which will be accelerated by the coronavirus pandemic.
  • However, Tesla won’t be the only major electric vehicle maker, so it’s unlikely to perform significantly better than other car stock in the long run.

Tesla’s stock (NASDAQ:TSLA) is already bucking the coronavirus trend, but today, investors received more good news.

Bloomberg published its annual electric vehicle outlook (EVO) report, finding that sales for fossil-fuel cars have peaked. Better yet, electric vehicles (EV) will account for most automobile sales from 2037.

EV sales will recover more quickly from the coronavirus downturn than sales for combustion vehicles. While Tesla’s future looks bright, it’s going to face increased competition in the EV market.

Peak Combustion Engines

Things are getting increasingly tough for combustion vehicles (CVs). Not only are a growing number of nations planning to phase out CV sales and/or production in the coming years, but Bloomberg found that such sales peaked in 2017.

Worse still, “they are in permanent decline.”

The market for combustion vehicles has peaked. | Source: Twitter

What’s revealing about Bloomberg’s figures is that they assume that phasing-out targets won’t be met. In other words, the decline in CV sales could be even more rapid. If nations do begin phasing out CVs, we could see a massive drop from around 2030.

These are all positive developments for Tesla’s stock, which is already having a spectacular 2020. Even with the coronavirus downturn, Tesla is up by nearly 300% from a year ago.

Tesla stock performance across 12 months. | Source: Yahoo!

Long term demand for cars will remain stable. But as nations crack down on CVs, demand will be redirected towards EVs. That’s more good news for Tesla.

There’s a very good chance that the coronavirus pandemic could have the longer-term effect of increasing demand for cars. As Bloomberg notes in its report, the pandemic has highlighted “the value people place on private car ownership during times of crisis.”

Public transit use has been hit hard by Covid-19. Lockdown measures will be lifted gradually and there will be a lasting reduction in ridership of municipal bus and metro services. This will lead to more traffic congestion in cities.

Tesla Looks Good, But So Do Other Car Stocks

Tesla has been performing very well in recent years. In 2019, it sold more cars than in the previous two years combined. So if any car stock is likely to take advantage of an increased shift to private (electric) car ownership, you’d expect it to be Tesla stock.

Nonetheless, Tesla isn’t the only car manufacturer in the world and could become a relatively small EV player in the future. That’s because much larger manufacturers are all ramping up their EV production.

For instance, GM announced in March that it would launch 20 new EV models by 2023 while raising its spend on EVs and autonomous vehicles to $20 billion by 2025.

These goals are likely to change in the wake of coronavirus, but it shows that the general trend is towards more EV production for every car maker.

Vehicle makers realize the potential of EVs. | Source: Twitter

At the same time, there has long been a suspicion that Tesla stock is overpriced. For several months now, the Financial Crisis Observatory has been warning that TSLA is a bubble waiting to burst.

Disclaimer: This article represents the author’s opinion and should not be considered investment advice from CCN.com.

Sam Bourgi edited this article for CCN.com. If you see a breach of our Code of Ethics or find a factual, spelling, or grammar error, please contact us.

@_simonchandler_

Markets Contributor for CCN living in London, UK. Has a Bachelor's degree in History and Archaeology from Reading University in 2006, and a Master's in Philosophy from King's College London in 2011. Also contributes to Forbes and Digital Trends, among others. Email me | Follow Me on Twitter | My Website | Muck Rack