In virtually every major region of operation for the company – the U.S., China and Europe – the overall outlook for new vehicle sales (at least for BEVs) is generally bullish, with China leading the pack. However, the company’s stock performance (measured in terms of these ratios) exhibits a gentle decline since a brief period of bullishness in February.

There is some credence to this bearish outlook. For instance, industry observers largely agree that a limited product mix, increasing costs, competition from more affordable options, and domestic sentiment have been hindering its efforts to ramp up its position in China. Steadily rising competition in its home turf – including by well-established carmakers from Europe and Japan – threatens to chip away its massively dominant position. Large-scale recalls due to faults in the self-driving software are threatened with the possibility with compounding as U.S. regulators begin investigations into faults in the steering wheel. With greater lead times in deliveries comes the possibility of prospective customers simply switching to a whole host of alternative with varying value propositions.

Key Takeaways

It would be highly improbable that Tesla would lose all vestiges of its commanding market presence over the course of a single year. Newer models will be launched and deeper service offerings will be brought into place for the company to remain in the picture. In its home turf or anywhere else, it’s simply inconceivable that it will remain the only feasible choice for consumers. Thus, the company’s stock cannot be expected to maintain the high PE Ratio it continues to show, given that the average PE Ratio for the Domestic Automotive Industry lies at around the 11-12X mark. Thus, further stock price rationalization cannot be ruled out.