Apple Inc.’s reported foray into making its own self-driving, electric cars creates “a new Tesla bear case,” according to analysts at Morgan Stanley.

Tesla Inc. shares fell as much as 5.5 per cent Tuesday, adding to their 6.5 per cent drop on Monday, after Reuters reported that Apple is moving forward with autonomous technology and aims to produce a passenger vehicle by 2024 that could include its own battery design. Tesla’s two-day slump also follows its admission into the benchmark S&P 500 Index before the open on Monday.

“Apple’s potential entry into autos represents perhaps the most credible/formidable bear case for Tesla’s stock that investors have had to consider for some time,” analysts led by Adam Jonas wrote in a note Tuesday. Jonas gives Tesla a buy-equivalent rating with a US$540 price target, about 15 per cent below where it’s trading currently.

The iPhone maker getting into the vehicle market could also pose a threat to legacy automakers like General Motors Co. and Ford Motor Co., which will have a hard time competing if “Apple were to really throw its weight around,” Jonas said.

For suppliers of electric, autonomous and connected-car systems, meanwhile, Apple’s plans “could very likely mean a significant inflection in the speed and magnitude of a wide range of investments,” he added. Lidar suppliers include Luminar Technologies Inc. and Velodyne Lidar Inc. rallied Monday after the report and continued to rise Tuesday.