Coronavirus Only A Catalyst of Tesla Stock Drop

By Ben Hamill - February 27 2020
SHARE

Coronavirus Only A Catalyst of Tesla Stock Drop

The reality-mongers and the unbelievers will be the first to say that they practically saw it coming. But not everyone is equally overjoyed by the fact that the coronavirus; coupled by a definite economic wake-up call of note; has caused Tesla stocks to take a royal dive. Monday saw the electric car manufacturer’s stocks lose value twice that of the Dow and the S&P500 following the sudden global spread of the coronavirus.

Read More... Will You Catch The Corona Virus?

But even though the virus may very well have had a great deal to do with it all, many are of the opinion that Tesla is a dream that simply doesn’t currently have a place in a world facing a slew of human challenges. And in truth, it does seem altogether out of whack that electric auto-tech should be enjoying airtime in the face of everything from a near-global refugee crisis to a virus threatening to be declared a pandemic by the World Health Organisation.

Whatever your take on Tesla’s part to be played in the curbing of the emission of green-house gasses, motor vehicle safety or even just a general interest in futuristic technology, that the Tesla stock-crash has been coming for a time now; predating the outbreak of the feared coronavirus; is something many analysts fully agree on.

Tesla Heavily Reliant On China

That’s however not to say that the virus now known as COVID-19 had no definite part to play whatsoever. Tesla does after all have a massive plant situated in Shanghai, and furthermore relies mainly and quite heavily on Chinese parts on its production lines.

The result is that Tesla is much more vulnerable to the rise and fall of the Chinese economy in general. Production capacity is a huge problem as it stands at the moment due to the realisation that even though China appears to have largely contained COVID-19 within the boundaries of its own borders, fears of a resurgence remain and will quite likely remain for weeks or even months to come yet. All of this puts Tesla at a massive disadvantage, leaving the auto manufacturer much more exposed to market fluctuations than most other auto manufacturers.

Bigger Than COVID-19

But the role of a plummeting global economy; which is admittedly trudged further into the depths of misery by COVID-19 and its effects on already ailing world industries; in the Tesla stock-crash must not be brushed under the carpet. What Tesla specialises in is technology referred to as “moonshot tech”. This basically refers to any tech not generally viewed as being “real technology”. Or in friendlier terms, Tesla has its business rooted in novel or concept technology.

Tesla has effectively become the victim of a poor performance on the part of the “real” global economy. And the fact that tech stocks have been rising at tremendous rates over the course of the past 7 years hasn’t helped the electric car manufacturer’s plight either. The old saying of “what goes up, must come down” seems to be at play here, with the already dire situation being stubbed even more by “the taller they are, the higher they fall”.

Tesla’s stock drop over the course of only two days has the company some $19 billion out of pocket. No time like the present to “get real” it now seems.

FAQs

How much have Tesla stocks dropped?

Stocks lost value twice that of the Dow and the S&P500 in 1 day.

How much has Tesla lost?

As much as $19 billion in stocks.

Why is the Coronavirus an issue?

Tesla has manufacturing plants in Shanghai and relies on Chinese parts. With the Coronavirus, many manufacturers have shut down completely, or are working at reduced capacity.

Does the Chinese economy affect Tesla?

Yes, as they are more exposed to market fluctuations with manufacturers located elsewhere

What else is affecting Tesla stocks?

The general state of the global economy and a worldwide focus on less novelty technology.

What is moonshot technology?

Technology that is exploratory, ambitious and ground-breaking, with results that may be unknown.

SHARE