Tesla share price set to jump higher as car sales soar in South Korea

Tesla shares have soared in 2020 and investors can expect the electric car maker’s stock to continue on its upward trajectory after the company delivered a strong set of first quarter (Q1) results that showed a signifcant jump in sales in South Korea.

In fact, South Korea was a key market in helping the electric car maker exceed analysts’ expectations in Q2, with the country helping to make the Tesla Model 3 one of the best-selling vehicles on the market.

The popularity of the Model 3 in South Korea comes down to affordability, with the vehicle selling for $26,000 (₩31 million), helping Tesla shift more than 4000 in the East Asian nation during Q2.

Sales of the Model 3 were also supported by the South Korean government’s generous electric vehicle incentive scheme, which provides up to ₩26 million (circa $21,000) to citizens looking to go green.

Tesla closed at $1389 per share on Tuesday, representing yet another new all-time high for the stock, with company’s share price soaring more than 220% year-to-date.

Tesla records strong Q2 sales despite Covid-19 challenges

Looking more broadly, Tesla produced 82,272 vehicles in the Q2, with 90,650 deliveries. That included Model S/X production of 6,326 with deliveries of 10,600, and Model 3/Y production of 75,946 with 80,050 deliveries.

Deliveries came in well ahead of analyst expectations of a little over 70,000, with that feat made all the more impressive by the fact that Tesla’s Fremont factory was closed for a large portion of the quarter due to the coronavirus pandemic forcing the state of California to impose lockdown restrictions.

Tesla’s profitability remains a question mark

This latest rally is further proof of how Tesla’s stock price ‘defies underlying fundamentals and even future concerns that could dent growth and profitability’, including a resurgence of Covid-19 and geopolitical tensions, according to Monte Safieddine, market analyst at IG.

‘Whether one calls it a car company or a tech company; so far when it comes to Tesla’s share price, fresh record highs are being posted at a time when transportation is dented, and car companies are hurt,’ he added.

The speculative nature of the stock also means that ‘investors hunting for dividends won’t find Tesla an attractive option’.

‘But that also means price gains will be crucial in enticing investors into the volatile market, for any price increase that is clearly unjustified – if not, speculative - will scare away those looking for a healthy balance sheet and potential consistent returns, especially if liquidity woes return to the financial markets,’ Safieddine added.

How to trade stocks with IG

Looking to trade Tesla and other stocks? Open a live or demo account with IG and buy (long) or sell (short) shares using derivatives like CFDs in a few easy steps:

1. Create an IG trading account or log in to your existing account
2. Enter ‘Tesla’ in the search bar and select it
3. Choose your position size
4. Click on ‘buy’ or ‘sell’ in the deal ticket
5. Confirm the trade