TSLA Stock Plunge: Lower Gas Prices Among Tesla's Immediate Challenges

Tesla’s stock price continued to tumble Tuesday, dropping by more than $10 in the morning after falling for seven consecutive days. The decline comes amid an ongoing Tesla recall in Norway, analyst concerns that the company has overestimated its own sales and Wall Street predictions that low gasoline prices may cut demand for an electric luxury car.

Shares have fallen by more than 25 percent since hitting a record high in September, opening at $209.38 Tuesday before climbing again to $211.25 later in the morning. Shares have dropped by 14 percent over the last seven trading days, a dramatic decline that has experts suggesting Tesla’s long-term predictions may have been too ambitious.

The hastening drop has coincided with disappointing sales figures laid out by InsideEVs.com. The industry watchdog reported that Tesla sold 1,200 Model S vehicles in the month of November. That total was fewer than the two months prior and was seen by some as evidence that reduced gas prices, which have fallen to a four-year low of $2.66 per gallon on average, could change what a customer is looking for in a car. (Unlike other major car companies, Tesla does not release monthly sales figures.)

“With the low oil prices, people will think ‘I can buy a normal car, it’s more beneficial that way,’” Ole Hui, a Hong Kong-based analyst at Mizuho Securities Asia Limited, told Bloomberg News. “There’s less incentive to go to electric vehicles.”

Others aren’t convinced that potential owners considering spending between $75,000 and $100,000 on a Tesla are concerned about the price at the pump. Rather, it’s possible that sales were briefly down because Tesla is struggling to fulfill international orders out of a single factory in California.

“We don’t think consumers are really penciling out gas savings in their purchase. More are buying the car for its performance, its reliability and for the brand,” Ben Kallo, an analyst with Robert W. Baird & Co., wrote in a note Monday, as quoted by Bloomberg. “Although the recent decline in oil prices has caused concern about [electric vehicle] demand, we believe EV purchasers are focused on the long-term benefit of not being exposed to oil price fluctuations.”

Yet the fuel price fluctuation isn’t the only challenge Tesla is working to overcome. The company is recalling a batch of 1,100 Model S cars sold in Norway after discovering drivetrain problems created by inadequate greasing at the time of manufacturing. Tesla has previously said it will fly replacement parts to the Scandinavian country as well as hire more service workers to address the issue.