TSLA Stock: Tesla Autopilot Just Changed Everything

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TSLA stock - TSLA Stock: Tesla Autopilot Just Changed Everything

Source: Tesla Motors

Tesla Motors Inc (NASDAQ:TSLA) is facing some serious controversy after a federal probe has come to light following a fatal crash. The electric vehicle maker is responding with offense amid an investigation into the Tesla Autopilot feature, but regardless of what Elon Musk & Co. say, the market has determined that the news is quite significant for TSLA stock.

Currently, shares of Tesla stock are down 3% in premarket trading, and that’s after a 20% loss over the past 12 months. While the circumstances surrounding Tesla Autopilot are certain to create controversy, there are three things TSLA stock owners need to consider.

TSLA stock Tesla autopilot

Source: Tesla Motors

3 Things TSLA Stock Owners Must Keep in Mind

Before going any further, it should go without saying that it’s horrible that someone died period, whether the fault is with Tesla Autopilot or not. There’s a clear victim here, and it’s certainly not shareholders.

Still, TSLA stock investors have some realities to face in the wake of this news.

  • First, the National Highway Traffic Safety Administration’s investigation is entirely preliminary. As part of the investigation, the Tesla Autopilot function is being looked at because it was in use at the time of the crash. Theoretically, it could have been the cause — or the investigation could account to nothing.
  • Second, TSLA correctly points out that this is the first known fatality in 130 million miles where Autopilot was initiated. This compares to a broader metric of one fatality every 94 million miles in the U.S., and every 60 million worldwide. In other words, a fatality was inevitable — so far, Tesla Autopilot has done much better than the status quo.
  • Third, Tesla has ambitious goals of being a mass production company in the very near future. As that happens, and more TSLA vehicles are on the road, more problems are going to happen.

Faulty switches, emission problems, recalls and fatal crashes will happen. There’s no debate to be had here, and it doesn’t matter how well Tesla designs and manufactures its vehicles. The bottom line is that Tesla (or any other vehicle maker) simply can’t simulate hundreds of millions of miles without cars being on the road.

That’s when problems happen, and the world simply has to realize and accept this fact.

Moreover, amid the big goals that Elon Musk has set, TSLA stock holders must understand that unexpected issues, calamities and PR fallout are going to happen a lot more regularly as time goes on.

Mass Production Ahead

Ever since Tesla shocked the market in 2013 with better-than-expected unit sales, Musk has been determined to get TSLA to mass production as soon as possible. Earlier this year, Musk set a new target of 500,000 vehicles in 2018. That would be two years ahead of previous guidance, and 10 times what Tesla sold in 2015.

Furthermore, Elon Musk figures that 1 million annual units is possible by 2020. The company’s Model S and Model X start at $76,500 and $83,000, respectively. Therefore, Musk’s mass production hopes are based on the Model 3’s low starting price of $35,000 and strong pre-orders, fueling the notion that the Model 3 can be a top-selling vehicle.

With that said, it makes no difference that Tesla has missed every launch date and production guidance since before the company sold its first vehicle. What matters is that Tesla sales are exploding, and mass production is (/will be) a reality — for better or worse.

What This Means for Tesla Stock

TSLA stock is in a difficult-to-manage situation at the moment. One the one hand, Tesla must rapidly grow production volume to support its lofty $30 billion valuation. However, investors are reacting to a tragedy that, frankly, one had to have expected as it put more cars with the Tesla Autopilot function on the road.

But make no mistake: This will happen, several more times. It’s an unfortunate byproduct of Tesla’s growth, but it’s one that can’t prevented (short of closing the company’s doors).

And the likelihood of more negative headlines is especially worrisome for a momentum stock like TSLA, where a negative headline can change everything in a heartbeat.

It’s ironic that the thing (increased production) that’s needed to support Tesla stock is the same thing that will produce a higher volume of stock-impeding problems.

TSLA stock has a long, long road ahead.

As of this writing, Brian Nichols did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/07/tsla-stock-tesla-autopilot/.

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