Morgan Stanley: Tesla Fatalities Must Be Viewed In Context

Recent fatal crashes involving Tesla Inc TSLA vehicles have ignited a debate about the company's Autopilot technology. But the national attention afforded a small portion of U.S. crashes may not be painting an accurate picture of the relative safety of Teslas, according to Morgan Stanley. 

The Rating

Morgan Stanley analysts Adam Jonas and Armintas Sinkevicius maintained an Equal Weight rating on Tesla stock with a $291 price target.

The Thesis

The novel technology and disproportionate share of the industry’s media attention may bring Tesla “an extraordinarily high level of scrutiny” that muddies perspective and fuels overreactions, the analysts said in a Friday note. 

The incident rate for the vehicles is relatively unconcerning considering the rising number of Tesla cars on the road, according to Morgan Stanley. 

The analysts count five fatal crashes over an estimated 5 billion miles of driving, and — given about 94 percent of traffic accidents are attributable to human error, according to the National Highway Traffic Safety Administration — it is unlikely that all Tesla-related incidents can be blamed on the brand.

As the firm ramps its fleet through 2020, Morgan Stanley expects more cars on the road to correlate with more incidents.

“If Tesla's cars were to experience a fatality frequency equal to the U.S. national average as calculated by the Insurance Institute for Highway Safety Highway Loss Data Institute of 1.16 per 100 million vehicle miles, this would imply nearly 90 deaths per year (or 1.7 per week) when applied to our 2020 miles forecast,” Jonas and Sinkevicius said in the note. 

Operating on the assumption that Tesla vehicles are 80 percent safer in terms of fatalities per 100 million vehicle miles, the projected number of annual fatalities in the vehicles is just over 17, according to Morgan Stanley's calculations. 

Price Action

Tesla shares were set to open down slightly at $284.54 Friday. 

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Photo by Brett Hershman.