With all the hype surrounding the introduction of Tesla’s Model 3, I thought it worthwhile to revisit Tesla’s search trend. Bloomberg news reported (See article here.) that reservations on the Model 3 have now surpassed “…total sales of all previous Tesla cars combined.” At the same time Google search trends registered the largest number of weekly worldwide searches for the term ‘Tesla’ ever. But what does this all mean for the financial fortunes of Tesla? and can we infer anything meaningful from Google search trends? Let’s take a closer look.

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The most recent search spike represents the public’s reaction to what probably is one of the greatest sales achievements in Tesla’s history to date. However, when normalized search counts hit the 100 level (a spike), and especially when the spike far surpasses all other search records, it doesn’t necessarily equate to an overall change in trend for searches (or greater awareness of the brand) over the longer term. For instance, if you take the ‘Tesla’ search spike recorded back in July 2009, which coincided with the first deliveries of the Tesla Roadster, you’ll note that the following two-year trend was flat or marginally downward. Furthermore, it appears that search spikes will often signal a continuation of the overall trend in searches (or overall awareness of the brand) as depicted in the spikes observed in August 2013, October 2014 and May 2015.

If Google Trends is any indication of awareness of the Tesla brand, one look at the chart would show that there is a consistent increase. We note that in November 2012, the increase in searches took a much steeper trajectory and may be the result of increased brand awareness as Model S deliveries began at that time. We should be mindful that the modern car buying experience has changed in a fundamental way where prospective car buyer are resorting to the internet before setting foot in a dealership, and in Tesla’s case, never having to. (Reference)

Further to the above point, we note that the Tesla website allows for purchases/reservations for all their models, so as traffic increases and more people are searching for the term, we should expect a proportion of that traffic to translate into direct sales for the company. This is quite different from other auto manufacturers where cars are purchased exclusively at the dealership level and where Internet traffic is less telling of sales potential.

Tesla revenues really started to take off in 2013 where annual sales increased 387% from 2012 levels. It was about the same time where the trajectory in searches for the term ‘Tesla’ increased in a noticeable way, signalling a confirmation that perhaps sales would continue in a strong positive manner. It’s pretty obvious when looking at Google Search Trends to determine an uptrend in searches for the term ‘Tesla’ and that brand recognition is increasing. However, there is much more to gain in determining at what point that trajectory has changed as this could signal a change in revenues that the market may not have priced in. This raises the question, is the most recent spike in searches the start of a new trend/trajectory?

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With the information available, it would be hard to say that a new trajectory has been established until more search data becomes available. As noted earlier, in the case of ‘Tesla’ search spikes, they are not very effective indicators of a change in trajectory and are most likely a signal of a continuation of the existing trend. The existing trend is a very healthy one for the Tesla brand, but does not appear to give us any new information that isn’t already known about the company at this point. Suffice to say, we’re keeping an eye out on the trend.

Happy Trading!

TrendVesting

As of the date of release of this article, neither the author nor TrendVesting maintain a position (long or short) in Tesla (NASDAQ:TSLA). We remind all readers to review our ‘Disclaimer’ page shortly after reading this article.
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