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Why Elon Musk is probably not freaking out over plunging oil prices

Elon Musk, CEO of Tesla Motors, reacts to a reporter's question following the electric automaker’s initial public offering on Nasdaq, Tuesday, June, 29, 2010 in New York. (AP Photo/Mark Lennihan)
AP Photo/Mark Lennihan
Your guess is as good as mine.
By John McDuling
Published Last updated This article is more than 2 years old.

One of the indirect casualties of tumbling oil prices in recent weeks has been Tesla. Shares in Elon Musk’s electric automaker have sunk by about 25% over the past three months.

Lower gas prices, in theory, eliminate one of the key advantages of owning an electric car: They cost much less to run than normal cars, at least when gas prices are high. So the decline in oil prices is not great news for the company.

On the other hand, there are reasons to not be too alarmed about it. If you can afford to buy a Tesla, the cost of gassing it up is probably not your chief concern. (Its current flagship Model S costs about $70,000, though a “cheaper” new car, the model 3, is expected to cost at least half that when it is released in 2017.)

And don’t forget, Musk himself expressed alarm about the rapid rise in Telsa’s share price earlier this year. “I think our stock price is kind of high right now,” he said at the time. “If you care about the long term, Tesla, I think the stock is a good price. If you look at the short term, it is less clear.”

Wiser minds than me are trying to figure out whether the decline in oil prices is sustainable. But for Tesla’s share price, a breather that makes its valuation less euphoric might not be such a terrible thing.

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