&l;p&g;&l;img class=&q;dam-image ap size-large wp-image-618b569c03864930843504548fc9363b&q; src=&q;https://specials-images.forbesimg.com/dam/imageserve/618b569c03864930843504548fc9363b/960×0.jpg?fit=scale&q; data-height=&q;496&q; data-width=&q;960&q;&g; In this Friday March 23, 2018 photo provided by KTVU, emergency personnel work a the scene where a Tesla electric SUV crashed into a barrier on U.S. Highway 101 in Mountain View, Calif. The National Transportation Safety Board has sent two investigators to look into a fatal crash and fire Friday in California that involved a Tesla electric SUV. The agency says on Twitter that it&s;s not clear whether the Tesla Model X was operating on its semi-autonomous control system called Autopilot at the time. Investigators will study the fire that broke out after the crash. (KTVU via AP)
On March 23, a Tesla Model X crashed on a California highway — a tragedy for the driver and his family and friends. While Tesla is hoping to steer observers to the conclusion that it was the driver&s;s fault, evidence suggests that Tesla made a few mistakes.
This is not good news for Tesla investors. (I have no financial interest in Tesla securities).
Tesla came out with a statement late on March 30 that in my view appeared to&a;nbsp;blame the victim, suggest that Autopilot was not accident proof, point out that the highway barrier was not properly protected, and argue that Tesla cars are much safer than those of its rivals.
Before getting into the details of Tesla&s;s statement, what happened? On March 23 &a;nbsp;a Tesla Model X crashed on a South Bay freeway — at the Highway 101 and Highway 85 connector in Mountain View — causing the death of 38-year-old San Mateo resident, &l;a href=&q;https://www.bizjournals.com/sanfrancisco/news/2018/03/29/tesla-autopilot-huang-family.html&q; target=&q;_blank&q;&g;Apple software engineer&a;nbsp;Walter Huang&l;/a&g;.
Huang&s;s family reported that he alerted Tesla&s;s service department to a big problem with his Model X&s;s Autopilot. As the &l;a href=&q;https://www.mercurynews.com/2018/03/30/tesla-autopilot-was-on-during-deadly-mountain-view-crash/&q; target=&q;_blank&q;&g;&l;em&g;Mercury News&l;/em&g; &l;/a&g;reported, Huang&s;s family asserted that he &q;had taken the car to a dealer several times and complained that the function kept steering the car toward the highway divider into which he crashed.&q;
Tesla could not find any service records corroborating this claim.&a;nbsp;A Tesla&a;nbsp;spokesperson said &a;ldquo;we cannot find anything suggesting that the customer ever complained to Tesla about the performance of Autopilot,&a;rdquo; according to The Mercury News.
Tesla&s;s &l;a href=&q;https://www.cnbc.com/2018/03/30/tesla-says-crashed-vehicle-had-been-on-autopilot-prior-to-accident.html&q; target=&q;_blank&q;&g;statement&l;/a&g; seemed to me to blame Huang for the crash. It said,
&l;/p&g;&l;blockquote&g;The driver had received several visual and one audible hands-on warning earlier in the drive and the driver&a;rsquo;s hands were not detected on the wheel for six seconds prior to the collision. The driver had about five seconds and 150 meters of unobstructed view of the concrete divider with the crushed crash attenuator, but the vehicle logs show that no action was taken.&l;/blockquote&g;
Tesla pointed out that Autopilot is imperfect. &a;ldquo;Tesla Autopilot does not prevent all accidents &a;mdash; such a standard would be impossible &a;mdash; but makes them much less likely to occur. It unequivocally makes the world safer for the vehicle occupants, pedestrians and cyclists,&a;rdquo; according to Tesla.
Tesla asserted that the highway was not safe. Last week&a;nbsp; the company wrote that the divider where the crash occurred &q;was missing a safety barrier designed to reduce the impact of a crash. We have never seen this level of damage to a Model X in any other crash.&a;rdquo;&a;nbsp;To this, Caltrans responded that it is reviewing the facts and circumstances of the collision as well as cooperating with the NTSB investigation, according to the Mercury News.
And Tesla concluded&a;nbsp;by claiming that its vehicles are nearly four times safer than other manufacturers&s;. Its statement noted that &q;There is one automotive fatality every 86 million miles across all vehicles from all manufacturers. For Tesla, there is one fatality, including known pedestrian fatalities, every 320 million miles in vehicles equipped with Autopilot hardware.&q;
I am confident that Tesla fans will gladly accept the company&s;s explanations. But one reason for the smaller number of fatalities could be that Tesla has far fewer vehicles on the road.
Tesla&s;s U.S. market share is tiny. According to the &l;a href=&q;https://www.washingtonpost.com/business/economy/teslas-transformative-year-slams-on-the-brakes/2018/03/30/96f498be-32bf-11e8-8abc-22a366b72f2d_story.html?utm_term=.bf4f4bc7fd12&q; target=&q;_blank&q;&g;&l;em&g;Washington Post&l;/em&g;&l;/a&g;, &q;Tesla sold just 50,145 cars last year, amounting to 0.29% of the U.S. auto market. Yet its market capitalization, even after a rotten week of trading, still falls just short of General Motors&a;rsquo;, which last year sold 3 million cars in the United States &a;mdash; and earned $12.8 billion excluding one-time items.&q;
At a $45 billion market capitalization, investors still value Tesla at &l;a href=&q;http://www.morningstar.com/stocks/xnas/tsla/quote.html&q; target=&q;_blank&q;&g;$3.75 per dollar of sales&l;/a&g;; that is over 10 times more than GM (with a market cap of $51 billion).
To fix this disparity, is it better to bet that Tesla&s;s valuation&a;nbsp;will fall or that GM&s;s will rise?