Why Is Tesla Underperforming The Market? | The Motley Fool

In this video, I will be talking about Tesla‘s (NASDAQ:TSLA) China sales numbers for June, the recent Tesla FUD, and why Tesla stock is underperforming the market. Tesla shares are down 10% year to date while the NASDAQ Composite (NASDAQINDEX:^IXIC) is up 14% and the S&P 500 (SNPINDEX:^GSPC) is up 16%. 

Record-breaking quarter

In the second quarter, Tesla produced 206,421 vehicles and delivered 201,250, up 121% year over year, making that its best quarter of deliveries ever. This week, according to the China Passenger Car Association, Tesla sold 33,155 China-made vehicles, including those for export. Domestic sales in China improved, with Tesla selling 28,138 China-made cars in June, up from 21,936 the previous month.

So why isn’t the market acting accordingly?   


Tesla is getting hit with one negative headline after the other. First, “Tesla recalls 285,000 cars in China over cruise-control problem,” which, if you just read the headline, sounds very bad. But it wasn’t nearly as bad as it sounded. Tesla owners affected by the recall will receive a free software update, which they can have installed either remotely or in person.

Second, a family has launched a wrongful death suit against the company, blaming the performance of its Autopilot driver-assistance software for the death of a 15-year-old child, who was killed when a Tesla, possibly operating on Autopilot, collided with the family’s pickup truck. It was reported that the child had been in the front passenger seat and was not wearing his seat belt.

And lastly, a brand-new Tesla Model S Plaid spontaneously burst into flames just days after delivery. While this headline might sound familiar, Tesla cars are less likely to catch fire than other vehicles, and there’s data to back this up. But since Tesla makes for great headlines and generates lots of web traffic, you will see it more.

Numbers don’t lie

Tesla provides the following statistics:

  • One accident involving a Tesla for every 4.19 million miles driven in which drivers had Autopilot engaged.
  • For those driving without Autopilot but with active safety features, one accident for every 2.05 million miles driven.
  • For those driving without Autopilot and without active safety features, one accident for every 978 thousand miles driven.
  • By comparison, the National Highway Traffic Safety Administration’s most recent data shows that in the United States there is an automobile crash every 484,000 miles.
  • From 2012 to 2020, there has been approximately one Tesla vehicle fire for every 205 million miles traveled.
  • In the United States, there is a vehicle fire for every 19 million miles traveled. 

Long story short, headlines generate clicks, but Tesla’s data suggests that its cars are anywhere from two to nine times safer than any other car on the road. Data is Tesla’s friend, and for investors, that’s a positive sign. 

Do watch the video below for the full insights.

*Stock prices used were the closing prices of July 7, 2021. The video was published on July 8, 2021.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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