6 Negative Headlines Overnight in China Haunt Tesla (TSLA) - GLJ Research

April 21, 2021 7:28 AM EDT
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Bearish Tesla (NASDAQ: TSLA) analyst Gordon Johnson from GLJ Research highlighted 6 negative headlines overnight from China, the company's highest-growth car market:

(1) China state media is calling for an independent investigation of TSLA’s credibly alleged brake issues/defects (link), where a similar class action lawsuit was filed in the USA (suggesting this issue could be widespread) – while NHTSA found no wrongdoing, NHTSA has been credibly alleged to use flawed data when investigating the safety of TSLA’s cars (see here),

(2) its been alleged by China state media that Ping An, one of China’s largest insurers, has temporarily suspended services to TSLA cars (link),

(3) it was alleged by China state media that TSLA Vice President Tao Lin was absent from a scheduled seminar on Wednesday on industrial chain security at the Boao Forum after the company's "cocky" response to a high profile consumer complaint sparked anger in China (link),

(4) another fiery car crash was reported in China, when the Tesla collided with a concrete barrier on the right side of the road and another small car, resulting in the death of the TSLA’s passenger on the spot, which is currently under investigation (see this link and this link),

(5) it was reported by state media that an unknown owner of a TSLA car in southern China's Nanning parked their damaged car in front of a mall with banners claiming the vehicle accelerated automatically and had a brake failure (link), and

(6) NIO’s President officially called out TSLA’s “FSD” low adoption rate, seemingly also calling into question its safety, saying: “Car companies need to refine FOTA (Firmware Over-The-Air) before pushing out advanced autonomous driving to ensure the business model works properly" (link)

Commenting on the negative headlines, Johnson concludes: "These are 6 negative headlines, just overnight, in TSLA’s highest-growth car market of China. When you add to this credible allegations that the deciding US authority (i.e., the NHTSA) has used flawed data when investigating the safety of TSLA’s cars (link), it seems the conclusions made by China’s regulators in their investigations could yield a different result. Furthermore, the increase in the volume of these stories could impact demand for TSLA’s cars inside of China. When you add to all of this the NTSB saying, last night, that they are not involving TSLA in their investigation into this weekend’s TX crash that saw two men die (link) as a TSLA car burnt for roughly four hours, which one expert told us, and we quote “it means NTSB does not think Tesla can be trusted – it signals bad things…”, it seems the broader safety of TSLA’s cars could impact its global appeal."

Despite this, however, the analyst assumes no action against Tesla.

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