Tesla (NASDAQ:TSLA) shares have been on fire in recent years. As the world moves away from traditional combustion engines and towards electric motors, the company has delivered some fairly stellar performance. And with an eccentric, headline-grabbing CEO like Elon Musk, investor excitement about this business is arguably through the roof.
So just how much have these shares risen by? And can they continue to climb from here? Let’s explore.
Investigating Tesla shares’ performance
Often popular stocks don’t tend to deliver very good returns. I’ve previously highlighted some like Lloyds Banking Group and Rolls-Royce that fall into this category. But in the case of Tesla shares, the returns have been monumental. So much so that a £1,000 ($1,350) investment in January 2017 would now be worth around £20,760 ($28,025)!
When comparing the US stock to the S&P 500 index, it’s outperformed the market by around 1,970%. That’s pretty impressive, especially for a company that, in the past, struggled to get its cars out of its factories. So, what’s behind the explosive growth?
A lot of the share price gains can be attributed to substantial hype. But is the excitement warranted? In my opinion, yes. Tesla has garnered quite a reputation for quality and technical achievement. Its proprietary battery technology enables its various vehicle models to travel some of the longest distances on a single charge versus competitors. And the addition of its Supercharger technology lets travellers get back on the road in as little as 15 minutes.
Consequently, the company has had little difficulty acquiring customers. In fact, for many years, Tesla struggled to keep up with demand. Today, that problem seems to be disappearing. With more production facilities on-line, the group delivered a record 936,172 cars in 2021. That’s an 87% year-on-year increase despite the global semiconductor shortage and other disruptions created by the pandemic.
With that in mind, seeing Tesla shares explode over the last five years is hardly surprising. And if it can continue to deliver similar double-digit growth, then the stock might continue to surge from here.
Taking a step back
While the achievements of this carmaker are impressive, there remain plenty of challenges ahead. Tesla has operated in a fairly uncontested environment so far. It’s only been in the last two years that traditional carmakers have begun putting serious money into expanding their electric vehicle fleets.
Unfortunately for Tesla, this means the advantage of being first could soon start losing its power. With significantly more options available today, consumers may start looking to other electric vehicle brands – most of which have far more resources at their disposal for production, marketing, and delivery.
Needless to say, if customers aren’t willing to wait in line for a Tesla vehicle, or the company is unable to further ramp up production, then the group’s shares will likely suffer over the long term.
Time to buy?
All things considered, I’m not tempted to add this business to my portfolio. For most of Telsa’s operating history, it’s had very little pressure from its rivals in the electric vehicle space. Now, with fierce competition brewing, I will wait and see how it fares before putting any money into Tesla shares.