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Why Tesla Is Leading the Nasdaq Lower Monday

By Dan Caplinger – Updated Sep 20, 2021 at 4:26PM

Key Points

  • The Nasdaq fell sharply along with the rest of the market.
  • Tesla was one of the worst performers among top Nasdaq stocks.
  • Despite facing multiple issues, Tesla's fundamental strengths remain little changed.

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A host of issues plagued the EV pioneer.

The stock market got off to a bad start on Monday morning, and even the high-flying Nasdaq Composite (^IXIC) couldn't avoid steep losses. At noon EDT, the Nasdaq was down 2.5%, on pace for its worst day in months.

Some of the biggest companies in the Nasdaq proved vulnerable to the broader downturn. Seeing particularly steep losses was Tesla (TSLA), as its stock was down more than 4% at midday on Monday. The electric-auto maker faced a number of different company-specific issues that gave it more downward exposure than many of its Nasdaq peers. Below, we'll look at what Tesla is dealing with right now.

Adult and child charging electric vehicle at station.

Image source: Getty Images.

A list of troubles

Tesla has long been a volatile stock, so it's somewhat natural for its share price to move by larger percentages than the overall market. Today, though, the company is seeing challenges on multiple fronts, and investors seem a bit less confident in Tesla's ability to make it through all of them unscathed.

First, over the weekend, Tesla got the news that the U.S. National Transportation Safety Board would open an investigation into a fatal crash earlier this month involving a Tesla vehicle in Florida that led to the deaths of two people, including the driver and a resident of the home into which the vehicle crashed.

Meanwhile, also from the NTSB, its chair, Jennifer Homendy, made critical comments about Tesla's driver assistance efforts. Rather than expanding its autopilot capabilities toward the goal of full self-driving capacity, Homendy believes that Tesla needs to concentrate more on the "basic safety issues" affecting its vehicles. The interview she gave isn't an official position, but it reflects the less than cordial relationship between the NTSB and Tesla in the current administration.

And finally, nervousness about the Chinese economy made investors somewhat more nervous about Tesla's prospects in the world's most populous nation. Chinese EV rival Li Auto (LI -3.18%) saw its stock fall 7% after it announced a reduced outlook on its vehicle delivery volumes for the third quarter. The previous guidance from Li suggested deliveries of 25,000 to 26,000 for the period, but it now expects a slight shortfall, coming in at 24,500. That news is rippling across a wider array of Chinese EV stocks.

Not a big deal -- yet

At this point, it would be premature to draw too many negative conclusions from the downward move in Tesla's stock price. Even after the drop, the shares are still up more than 25% in just the past four months. The automaker had built up positive momentum that took it to its best levels since February, when it was climbing toward record levels at around $900 per share.

Of those issues, probably the most important is whether Tesla can keep sales up in China. Tesla has had great success internationally, capturing market share even when the Chinese auto market more broadly has hit periods of stagnation. The company's Gigafactory in Shanghai gives it a competitive advantage over other prospective U.S. automaker entrants that might want to tap into Chinese demand. Yet if problems in the real estate market in China bleed over into autos and the broader economy, it could prove to be a new headwind for Tesla.

Today's volatility for Tesla isn't extreme by historical standards, and long-term shareholders are used to it. Despite regulatory worries, the fundamental picture for Tesla's business remains unchanged, and that's a positive sign for fans of the stock.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.

Stocks Mentioned

Tesla Stock Quote
Tesla
TSLA
$194.70 (%)
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
^IXIC
$11,468.00 (%)
Li Auto Stock Quote
Li Auto
LI
$21.30 (-3.18%) $0.70

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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