Falling crude oil and gasoline prices are putting the brakes on Elon Musk’s Tesla Motors (NasdaqGS: TSLA) and alternative energy sector exchange traded funds.
There is a psychological correlation between energy prices and alternative clean technology stocks, and the plunge in oil prices have erased a good chunk of gains in the alternative energy sector.
For instance, investors fear that electric car demand will diminish as the cheap gas prices would boost sales of gasoline-powered vehicles. TSLA touched a low of $195.4 Tuesday, trading around its lowest since the May correction earlier this year as observers argue that lower oil prices will diminish demand for alternative energy-related stocks, writes Hailey Lee for CNBC.
The West Texas Intermediate crude oil futures were at $55.9 per barrel and Brent crude dipped to $59.9 per barrel Tuesday, hovering around a five-year low.
Additionally, TSLA was weakening Tuesday after Tesla’s China president Veronica Wu resigned after 9 months, reports Doug Young for Altenergy Stocks. Some argue that the departure may reflect the slower-than-expected expansion in the Chinese market.
Meanwhile, the Market Vectors Global Alternative Energy ETF (NYSEArca: GEX), which includes a 9.8% weight toward TSLA, has declined 16.5% over the past three months while the First Trust NASDAQ Clean Edge Green Energy Index Fund (NasdaqGS: QCLN), which has a 8.0% tilt toward TSLA, decreased 18.2%. [Tesla Hampers These ETFs]
GEX tracks global companies involved in the alternative energy industry and includes exposure to industrials 45.4%, information technology 29.4%, utilities 12.0%, consumer discretionary 9.8% and energy 3.3%. The U.S. makes up a large piece of the ETF’s country weight at 64.2%, followed by Denmark 10.1%, China 7.0% and Italy 4.7%.
QCLN also includes a group of companies engaged in emerging clean-energy technologies and focuses on U.S. companies. Sub-sector weights include tech 39.3%, oil & gas 21.2%, industrials 19.2%, consumer goods 8.0%, consumer services 6.3% and utilities 5.5%.
Market Vectors Global Alternative Energy ETF
For more information on alternative energy, visit our alternative energy category.
Max Chen contributed to this article.