Shares of electric-car company Tesla (NASDAQ:TSLA) fell on Monday, declining about 6% as of 11:50 a.m. EDT. The stock's decline comes as the overall market pulls back and as Morgan Stanley analyst Adam Jonas warns that more Teslas on the road could negatively impact the company's brand.
The S&P 500 fell about 2.4% as of 11:50 a.m. EDT. Investors were spooked by the ongoing trade tensions between the U.S. and China. This overall market decline weighed particularly heavily on growth stocks like Tesla.
In addition, Jonas warned that more Tesla vehicles on the road and more used ones available for sale may make new Tesla sales less compelling.
"Adding more cars to the road is a form of free advertising," Jonas said in a research note (via Barron's). But this means "there may be a simultaneous price to pay in terms of eroding scarcity value."
Because demand has often outpaced supply for Tesla in the past, scarcity marketing has previously played a key role in creating buzz. But word-of-mouth marketing as more Teslas are delivered has also helped in the past.
In the company's most recent quarterly update, management seemed confident in the demand for its vehicles, reiterating guidance for total deliveries in 2019 to rise 45% to 65% year over year.