Tesla Stock Is Jumping Because Elon Musk Says Competition Doesn’t Matter

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Tesla

stock is starting a new week on solid footing, at least in part because of upbeat comments from CEO Elon Musk about demand for electric vehicles.

Most stocks are higher in Tuesday trading, with gains of about 2.6% for and 3.1% for the

S&P 500
and

Nasdaq Composite,
respectively. But

Tesla

stock (ticker: TSLA) is doing much better. It’s up 11%, at $720.94 a share.

Exactly why any stock is outperforming over a short span of time is difficult to call, but Musk, who spoke Tuesday at a conference in Qatar arranged by Bloomberg, is likely a key factor. Although his interview touched on his deal to purchase

Twitter

(TWTR) and employment levels at Tesla—watch items for Tesla investors—not much has changed regarding those issues.

The bigger deal is likely comments about demand and competition. Musk said the biggest constraints on his company related to raw materials and production. He is more focused on that than on competition from existing auto makers vying for share of the EV market, or from start-ups taking aim at the business.

“As anyone knows who has tried to order a Tesla, the demand for our cars is extremely high and the wait list is long,” Musk said. In other words, Musk believes he can sell all the EVs Tesla can make for the foreseeable future. That is despite any new competition or price increases due to inflation.

Battery-electric EVs currently account for roughly 10% of global light vehicle sales, according to Credit Suisse analyst Dan Levy’s figures. Looking at the largest car markets, EVs’ share of sales of new vehicles is highest in China and lowest in the U.S.

Electric vehicles are taking a larger share of the market, but investors have worried that inflation might affect demand for new vehicles. Tesla stock dropped 8.5% on June 16 after price increases were posted on Tesla’s website. But Musk’s comments indicate that car buyers aren’t backing away from purchasing new EVs.

That was the best news for Tesla to emerge from the Tuesday conference.

Among all the other issues Musk hit on,

Twitter

might be the second-most important, but little new information emerged on that front. Musk is still concerned about the share of daily usage on the social-media platform that is generated by bots, an issue he has cited in saying his deal to buy the company is on hold.

The potential purchase has been an overhang for Tesla shareholders, who appear to be concerned that running Twitter could be a distraction for Musk. Tesla stock is down roughly 40% since Musk’s stake was disclosed, while the Nasdaq Composite has fallen 24%.

Tesla stock is volatile and might be expected to drop more than the Nasdaq in a bear market, but Tesla also reported surprisingly strong first-quarter results during that time. The company earned more than $3.20 a share during that time, while Wall Street was looking for closer to $2.20.

Write to Al Root at [email protected]