• Tesla shares hit an all-time high after smashing monthly sales records in China.
  • The May figures are a massive boon for the electric car maker, but significant global trends will be the stock’s real driver.
  • As battery technology improves, the company can keep pushing prices down and attracting more customers.

Tesla’s (NASDAQ:TSLA) shares are nearly reaching heights that would make its SpaceX program proud.

The electric carmaker is pulling away again after hitting a record monthly high of 11,095 Model 3 sales in post-pandemic China in May.

The stock has soared past its $917 February record high, which could lead many investors to question if it can go much further.

Tesla’s share surged to a record high after it produced more cars in a month in China than ever before. Source: Yahoo Finance

But if you look at the bigger picture, it is only just getting started.

It’s all about the (mega) trend

Investors get optimistic when they see record monthly sales figures, although such data ignore the long term.

Global leaders want a zero-carbon future, and this desire is not going away. But the significance of this overwhelming shift is arguably being obscured by the pandemic.

Tesla’s Model 3 has helped the carmaker appeal to new consumers. | Source: Tesla

As James Anderson, fund manager at the $245 billion Scottish asset manager Baillie Gifford, recently told Business Insider:

I still absolutely believe that the pandemic is obscuring what’s been the most important development of the year, which is the changes in the energy area. I still absolutely believe that when we look back, that will be considered much more a turning point than the pandemic.

This conviction has led the fund house to own more Tesla shares than any outside investor.

Tesla’s market-leading position on the crest of this energy transition wave should fuel the stock for some time yet.

Pushing boundaries

Technology is rapidly advancing, meaning electric cars will continue to improve as production costs fall.

Contemporary Amperex Technology Co announced this month it is ready to produce a battery that lasts 16 years and 2 million kilometers.

The Chinese giant, whose batteries are used by Tesla and Volkswagen, suggests this could be critical for electric vehicles.

Rapid developments in battery technology will continue to push down the cost of electric car ownership. | Source: Bloomberg

A battery with such a long life could be reused in a second vehicle, cutting electric car ownership costs.

It would also make moves by countries such as the U.K. more appealing to car owners.

Prime Minister Boris Johnson is set to offer U.K. drivers £6,000 to swap their combustion engine for an electric one. This is to support the electric car industry, according to The Daily Telegraph.

This could be one factor behind Elon Musk’s consideration to establish a gigfactory near Bristol, in the southwest of England.

Follow the ‘good’ money

Even if you find Elon Musk too controversial, or believe a competitor could steal Tesla’s edge, there’s another reason the shares should continue to rise.

Fund managers globally are increasingly embracing ESG, or Environmental, Social, and Governance investing. The concept means more asset managers want to invest with a conscience, appealing to their clients’ ethical and financial desires.

Flows into so-called ‘ethical’ funds were robust during the coronavirus crisis. |  Source: Morningstar

These ‘ethical’ funds sucked in $46 billion in the first three months of this year as other funds suffered massive coronavirus-driven outflows.

What’s more, Tesla is no longer an outlier. Fund managers are backing its smaller Chinese rival Nio.

Plus, carmaking giants such as Volkswagen, Nissan, and Toyota are all trying to emulate Tesla’s success.

Changing lanes

Few carmakers have expanded their appeal as rapidly as Tesla.

Conventional car brands have only gradually shifted their customer base over decades.

But Tesla has shifted from selling $100,000 cars to the wealthy to producing the entry-level Model 3 and Model Y affordable to the middle class.

Tech and electric car expert Paul Fosse believes it can keep winning this race.

As Tesla dramatically lowers the cost of its batteries over the next 5 years, I expect the company will ship a ‘Model 2’ at $25,000 in 2022… If Tesla doesn’t have robotaxis widely approved by 2024, I expect the company to drive costs further down by introducing a ‘Model 1’ for about $15,000 in 2024 or 2025.

As Fosse explains, the company is aiming to expand by reducing prices. This tech-based mindset is anathema to the slow-moving auto industry.

And that’s why Tesla’s shares are likely to reach even loftier heights in the years ahead.

Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com. The author does not hold any investments in Tesla stock.

This article was edited by Sam Bourgi for CCN.com.