Can Tesla Survive a Permanently Low Oil Price?

Dear Reader,


Global stock markets are in freefall again today.

Against that backdrop I am going to contemplate whether Tesla Inc., the electric vehicle manufacturer can survive oil prices at below 30 USD measured by both the Brent and WTI sorts for a long time. Let's say 5-7 years.

Yes, Tesla would probably survive for 5-7 years in such a situation, but its stock price would fall to somewhere at 100 USD, which would translate to market capitalization of 20 billion USD. This compares to the circa 170 billion USD  Tesla was valued at by the market only months ago.

Why do I think that? In short, governments will be hard-pressed to justify why they are subsidizing high priced energy sources like electric vehicles when the price of oil is so low. Consumers will also be less inclined to switch to electric automobiles, when the price of gasoline is so cheap at the gas stations.

And if a credit crunch due to the current coronavirus outbreak ensues, Tesla will have difficulties refinancing the operating loss it makes and could go bankrupt.

But even if this COVID-19 crisis passes quickly sub 30 USD oil could cause Tesla's market capitalization to fall drastically even from the present 8e billion USD to 20 billion USD.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich