Elon Musk and Tesla Fight Back! (November 18, 2013)

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Tesla Motors has been in the press lately for all the wrong reasons. First, the earnings missed, then the stock started selling off (it’s down about 35% from its October 1 closing high), and finally, there’s been reports of 3 fires now, in a span of 6 weeks.

Speculation

I’m a huge fan of Tesla — I love their cars and technology. I’ve even invested in the stock. The Tesla factory is only about 15 minutes away from my house, so I’m definitely rooting for the home team! With all the bad press lately, I can’t help but feel a little bad for the company. I want them to succeed and I hope all this negative press dies down soon.

I’m also concerned about reliability. Anytime you hear “fire”, you start to worry a little bit. It’s just natural human reaction. And now the media is running wild with it. After awhile, you start to wonder:

  • Are electric cars safe?
  • Will there be a recall?
  • Would I be safer in a gasoline car?

Up until now, Tesla has been pretty silent as well. This makes investors nervous. Does the company no longer stand behind its vehicle? Are they hiding something? By remaining quiet, are they admitting to us that the car has some serious issues?

Official Statement

Well, enough with the speculation. Elon Musk and Tesla have spoken, releasing an official statement on their website today.

The Mission of Tesla By Elon Musk, Chairman, Product Architect & CEO

There’s some good stuff in that press release — things I know any fan or investor in Tesla are glad to hear. However, like with most statements coming from a company, don’t believe EVERY single word. In short, the company is standing firm behind its product. Tesla won’t be issuing any recalls, or changing anything structurally (for Model S). Just a minor software patch to raise the vehicle’s clearance. In Tesla’s mind, they haven’t done anything wrong, and driving a Model S sedan is still driving the safest car on the road, which was backed by the National Highway Traffic Safety Administration (NHTSA) earlier this year. A full investigation by the NHTSA is currently in progress.

Obviously, Tesla hasn’t been around for a long time, but the most important thing will always be human safety. To date, at least, there have been no serious injuries or deaths ever reported.

Our primary concern is not for the safety of the vehicle, which can easily be replaced, but for the safety of our customers and the families they entrust to our cars. Based on the Model S track record so far, you have a zero percent chance of being hurt in an accident resulting in a battery fire, but what about other types of accidents? Despite multiple high-speed accidents, there have been no deaths or serious injuries in a Model S of any kind ever. Of course, at some point, the law of large numbers dictates that this, too, will change, but the record is long enough already for us to be extremely proud of this achievement. This is why the Model S achieved the lowest probability of injury of any car ever tested by the US government. The probability of injury is the most accurate statistical figure of merit, showing clearly that the Model S is safer in an accident than any other vehicle without exception. It is literally impossible for another car to have a better safety track record, as it would have to possess mystical powers of healing.

I don’t own a Tesla and probably never will until Gen 3, or a cheaper version arrives. Still, I’m glad to see Tesla stepping up to the plate to offer the following:

Third, to reinforce how strongly we feel about the low risk of fire in our cars, we will be amending our warranty policy to cover damage due to a fire, even if due to driver error. Unless a Model S owner actively tries to destroy the car, they are covered. Our goal here is to eliminate any concern about the cost of such an event and ensure that over time the Model S has the lowest insurance cost of any car at our price point. Either our belief in the safety of our car is correct and this is a minor cost or we are wrong, in which case the right thing is for Tesla to bear the cost rather than the car buyer.

If I was a prospective buyer, I think I would feel reassured enough to proceed with purchasing a Model S. That second car crash was brutal, and the driver was able to walk away unharmed! Still, I know how people like to freak out about things… especially fires. Even if there are gasoline fires everyday… funny how the media can warp your mind.

 

If you were a prospective buyer, would the recent fires be enough to scare you off? Has Tesla done enough to reassure consumers on the safety of their vehicles?

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Martin
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I vaguely remember some negative news flashed thru my attention, but I didn’t pay much attention to it.

Since I do not follow the company I do not have an opinion and I even cannot say whether it is a buy opportunity.

Be it JNJ for example I would be buying on bad news right away, but not sure if Tesla is the same bracket.

If I remember it correctly, you sold Tesla some time ago to raise cash, right? So you should be good and this may be a good time to get back in, or not?

CI
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That’s a pretty strong response to an issue that’s all over the news. I think you’re right about Tesla, they are doing big, big things. They are definitely on to something. TSLA stock won’t fit my strategy any time soon, but it appears to be a huge growth story!

FIF, I’m proud of you man! You seem to be killing the real estate game. Capitalism at its finest. Do you plan to continue accumulating properties? Pay off debt? Rebuild a stock portfolio?

Must be nice to have so many options!

Maverick
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Maverick

Tesla…revolutionary, NO. Different, YES. Look, as an avid follower of the Auto industry they took a different approach. Since they are a low volume producer, many regulations don’t apply…yet. They use laptop batteries. They only have one layer of protection surrounding the batteries. The Volt has three. Do they think outside of the box, yep. Will they make it long term, highly unlikely as a volume car manufacturer. Musk will do well if he sells the intellectual property to Toyota. Which I predict is his only long term position. If you rode the stock up, I suggest you get out now. Tesla isn’t making profits and doesn’t follow GARP accounting principles. They are earning credits which will soon run out.

Financial Samurai
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Elon has to be careful with his blogging. I see his point, but if there is a nationwide recall, the stock will be cut IN HALF!

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