Tesla stock drops 15% on China, coronavirus fears

Tesla’s stock skidded as much as 15% on Thursday amid signs of weak sales in China due to a softening economy and the still-spreading coronavirus.

The electric carmaker’s shares fell to as low as $669.02 during morning trading, before slightly recovering. Its shares closed at $679, down nearly 13%.

Tesla had promised aggressive growth in China this year, but all signals point otherwise. China’s state-run Automotive Information Net has reported that registrations of new Tesla cars were down 46% between December and January, to 3,563 vehicles.

Meanwhile, Chinese EV sales dropped a steep 34.6% in the fourth quarter of 2019, investment bank Cowen said in an early February report.

Those declines may not be strongly linked to coronavirus: Chinese authorities didn’t report the first cases to the World Health Organization until December 31. China has been in a mild overall slowdown, with economic growth declining in 2019 to 6.1%, from 6.5% in 2018.

But coronavirus does appear to have sharply accelerated the broader trend. Overall car sales in China declined a staggering 92% in the first two weeks of February, according to Bloomberg. Tesla blamed coronavirus for a two-week closure of its new Shanghai factory.

Tesla’s disappointing China numbers come at a particularly sensitive time for its stock, which soared nearly 260% between late October and its peak on February 19. Tesla is now valued at more than $127 billion, far more than competitors like Ford and GM, which sell far more vehicles and, unlike Tesla, are consistently profitable.

That means investors expect Tesla to grow quickly to justify its high-flying stock price. And China, which makes up more than half of the global EV market, has been central to that imperative.

“The [Tesla Shanghai Gigafactory] was expected to be the growth engine prior to the coronavirus outbreak,” Cowen analyst Jeffrey Osborne told Fortune. “Now with factory shutdowns and consumers cautious on spending as recent car registration data suggests, there is heightened investor concern around broader auto demand trends in China.”

Related coronavirus fears have helped send the broader stock market into a correction, with the Dow Jones Industrial Average down 7.7% since February 19. Tesla stock is now off 23% for the same period.

For Tesla’s critics, though, today’s slump is a welcome dose of sanity for a stock driven by hype.

“Tesla’s stock has been completely decoupled from any iota of reality since the $300s in December,” said Mark Spiegel, a longtime Tesla critic and short-seller. “It’s difficult to assign a specific rational cause to the deflation of a bubble, as it wasn’t rationality that inflated it in the first place – it was mania.”

Still, Tesla’s stock remains up more than 180% since its rally began in late October.