Tesla share price has dropped by more than $100 in two days

Key Points
  • Tesla shares declined for a second day in a row on Autopilot safety criticisms from the National Transportation Safety Board.
  • Tesla's market cap is still greater than that of General Motors, Ford and Fiat-Chrysler combined.
Elon Musk, co-founder and chief executive officer of Tesla Motors Inc., speaks during an interview at the company's assembly plant in Fremont, California, U.S., on Wednesday, July 10, 2013.
Bloomberg | Bloomberg | Getty Images

The share price of Tesla dropped more than $100 in just two days amid a broader market sell-off fueled by coronavirus concerns. The stock dipped by as much as 7.3% on Tuesday, and closed down more than 4% for the day at $799.91. It's shed about $19 billion in market cap during that period.

Despite the drop, Tesla's market cap is still greater than that of General Motors, Ford and Fiat-Chrysler combined.

Tesla shares took a hit mid-day Tuesday as the National Transportation Safety Board criticized the company's Autopilot systems and attitude towards safety at a hearing in Washington D.C.

Tesla Autopilot is a kind of advanced driver assistance system which now comes standard in the company's cars. Distinct from its not yet complete "Full Self-Driving" system, Autopilot includes features like traffic-aware cruise control (TACC) and Autosteer, which is meant to keep a driver's car in its lane while traveling on the highway.

While Tesla fine print cautions drivers to use Autopilot while remaining attentive to traffic and their surroundings, ready to take over at any minute, many do not.

The NTSB said Autopilot inadequacies were one factor that led to a fatal Model X crash outside of Mountain View, California in 2018.

In that crash, Apple engineer Walter Huang was driving his Model X with Autopilot engaged, apparently distracted by a game on his work-issued mobile phone. The Tesla Autopilot system failed to keep the Model X in its highway lane, failed to monitor and alert the driver to take over manually, and the car's collision avoidance systems also failed, according to the NTSB report. Huang's Model X crashed into a barrier, then was hit by two other vehicles before its battery pack ignited.

Ethan Douglas, senior policy analyst for cars and product safety at Consumer Reports, said in a bulletin after the NTSB report:

"Manufacturers and NHTSA must make sure that these driver-assist systems come with critical safety features that actually verify drivers are monitoring the road and ready to take action at all times. Otherwise, the safety risks of these systems could end up outweighing their benefits. The evidence is clear, and continuing to pile up, that if a car makes it easier for people to take their attention off the road, they're going to do so—with potentially deadly consequences."

Analyst downgrade

Earlier on Tuesday morning, Jefferies analyst Philippe Houchois downgraded the stock from a buy to a hold rating.

In his research note to investors, he wrote: "However convinced we are about the Tesla equity opportunity, we still need valuation to be grounded into some visibility on market size and potential profitability."

Tesla has maintained an edge over competitors in terms of its battery-tech, and the connectivity of its cars and energy storage products, the Jeffries analyst wrote. But much is riding on Tesla's planned Battery and Powertrain Day event for investors this spring in Buffalo, New York.

Executives have yet to revise their guidance around vehicle production and sales since Tesla's 2019 fourth-quarter earnings call on January 29. At that time, CFO Zachary Kirkhorn said that the coronavirus epidemic may delay production by about a week and a half in China.

Since then, Audi and Mercedes slowed or paused production of their electric vehicles citing supply constraints related to the COVID-19 epidemic.

Now, questions are looming around the impacts of the virus to Tesla's operations and supply chain in China and beyond. In its annual filing, published on February 13, Tesla at least acknowledged single-source suppliers and health epidemics as material risks to its business.

Correction: Tesla's share price finished down 4.06% for the day on Tuesday.  

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