The Way to Play the Federal Investigation into Tesla

Last week was a difficult one for Tesla, Inc. (NASDAQ:TSLA).

Tesla (TSLA) Motors Assembly Plant in Tilburg, Netherlands.

Source: Shutterstock

The electric vehicle (EV) company is starting to feel the heat from federal regulators as the company’s Autopilot system is now under investigation by the National Highway Transportation Safety Administration (NHTSA).

On Monday, the NHTSA announced details of its probe into the company’s Autopilot and Traffic Aware Cruise Control system, which allows Tesla vehicles to match traffic speeds. The federal agency is looking into 11 crashes since 2018 that led to 17 injuries and one death after the vehicles crashed into parked emergency vehicles.

The NHTSA will investigate most, or about 765,000 of Tesla’s models sold in the U.S., including its Models S, X, 3 and Y, from 2014 to 2021. The accidents happened between January 22, 2018 to July 10, 2021 in nine different states.

At each of the crashes in question, the Tesla cars hit emergency vehicles that were stopped and surrounded by flares, road cones, lights or other equipment to warn drivers passing by.

The NHTSA will examine in detail how the company’s Autopilot system watches over and regulates driver attention and engagement. Investigators will also look at how the system finds and responds to objects and other situations it encounters on the road.

The European New Car Assessment Program gave Tesla’s Autopilot system average scores because it had difficulty keeping drivers engaged — the system needs a driver to keep their hands on the wheel to engage.

The stock dropped 5% Monday as news of the investigation broke, and it’s down about 6% this week.

Tesla also seems to be suffering from bad press in China, ranging from quality concerns to worries over theories about privacy breeches from on-board cameras. The company only sold 8,621 cars last month in China while overall electric vehicle  sales surged 164% in July year-over-year to 271,000 units, according to the China Association of Automobiles.

And on Wednesday, Senators Richard Blumenthal and Ed Markey asked the Federal Trade Commission (FTC) to investigate Tesla for “potentially deceptive and unfair practices” in marketing its Autopilot and Full Self-Driving features.

“Tesla drivers listen to these claims and believe their vehicles are equipped to drive themselves — with potentially deadly consequences,” the senators said.

Interestingly, Tesla stopped using artificial intelligence (AI) technology from one of my fundamentally superior recommendations for my Growth Investor subscribers in the sector, NVIDIA Corporation (NASDAQ:NVDA), back in 2018. That means NVDA won’t get blamed for anything Tesla has been up to.

However, despite the bad news recently for Tesla, the EV boom is fully underway in China.

And the fundamentally superior Chinese EV manufacturer I’m recommending to my Growth Investor subscribers just released its second-quarter results last week. I’m talking about Nio, Inc. (NYSE:NIO).

The company reported an adjusted earnings per ADS loss of $0.03, which is up from an earnings per ADS loss of $0.18 in the second quarter of 2020. The analyst community was expecting an earnings per share loss of $0.11, so NIO crushed expectations.

With its efforts for a new mass-market brand, NIO is aligning its business to better compete with rivals like Tesla. Company management even stated, “We want to provide better product and service at prices lower than Tesla.” NIO is even planning to introduce three new car models in 2022, which includes its first sedan.

Even without these new models, NIO revealed that it’s experienced strong demand for its electric vehicles, as it delivered 21,879 in the second quarter. That represented a 111.9% year-over-year increase. Total vehicle sales soared 127% year-over-year to RMB7.91 billion, while total second-quarter revenue rose 127.2% year-over-year to RMB8.45 billion. In U.S. dollar terms, NIO achieved total revenue of $1.31 billion in vehicle sales, topping estimates for $1.28 billion.

Looking forward to the third quarter, NIO expects to deliver between 23,000 and 25,000 vehicles, or an 88.4% to 104.8% year-over-year increase. Total third-quarter revenue is expected to grow between 96.9% and 112.8%, or $1.38 billion to $1.49 billion.

Despite the strong results, the stock pulled back recently, but I look for it to bounce back after a little consolidation.

In fact, I expect NIO to be one of the electric vehicle winners, as the company was bailed out by the Chinese government last year. The Chinese government injected $1 billion and now has a 24% ownership in the company.

China wants to dominate at least five major industries by 2025, and NIO is now its ticket to dominate EV manufacturing. With the backing of the Chinese government, some Wall Street firms are now eager to help NIO by issuing new debt or equity. So, I wouldn’t be surprised if NIO surpasses Tesla in the upcoming years.

Of course, there are several other stocks on my Growth Investor Buy Lists that are perfectly positioned to benefit from the EV boom. But my Growth Investor Buy Lists are also locked and loaded with fundamentally superior stocks  in several of the most explosive sectors of the economy, like internet technology, semiconductors, artificial intelligence  and healthcare. So, my Growth Investor  Buy List represents the crème de la crème of growth stocks with strong sales and earnings.

If you’re interested in my Growth Investor service, now is the perfect time to join. My Growth Investor August Monthly Issue includes three new buys, my latest Top 5 Stocks list, as well as my outlook for the market as summer draws to a close.

So click here now to get started!


Louis Navellier

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The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:

Nio, Inc. (NIO)

Louis Navellier, who has been called “one of the most important money managers of our time,” has broken the silence in this shocking “tell all” video… exposing one of the most shocking events in our country’s history… and the one move every American needs to make today.

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