Two More Fires: Tesla Is Back On The Front Pages

Jul. 8.14 | About: Tesla Motors (TSLA)

Summary

Another two crash fires but the drivers survived (though one of them seems to be a crook but that's besides the point).

The negative stock price reaction doesn't seem justified.

Demand in the form of orders should pick up and not decline.

[Editor's Note: The author has updated this article to reflect the two separate incidents, as mentioned in many comments below.]

Here we go again. Tesla Motors (NASDAQ:TSLA) is back in the headlines because of another two fiery crashes. In one of accidents this time there were deaths involved, so my heart goes out to the victims. Those unfortunate situations aside, it acts as a painful reminder that Tesla vehicles are indeed the safest on the road.

For those that missed it, a Tesla Model S was stolen in West Hollywood, California. The theft resulted in a high-speed chase at speeds going up to nearly 100 miles per hour. The vehicle during the chase crashed through two other vehicles. The Model S finally itself then crashed into a light pole, split in two, then caught fire presumably from the battery. There were at least seven injuries, including the driver, but no fatalities.

In a second incident that same July 4th weekend, another Model S rear ended a Toyota which became engulfed in flames. There were three fatalities in that vehicle which is absolutely horrible. But in the Tesla vehicle, according to the Los Angeles Times, "The Tesla driver, identified as Ric Garrison, suffered minor injuries but was released from the scene Friday night." He survived a terrible crash but was able to essentially walk away.

Recall that the German Federal Motor Transport Authority and the U.S. National Highway Traffic Safety Administration each conducted an investigation into the safety of the Model S. In both cases, no defects were found. Consumer Reports has also given the Tesla Model S the highest safety rating while CEO Elon Musk has repeatedly reminded everybody that there have been no deaths with a Tesla vehicle.

At the end of the day, the test of time and experience on the road is the ultimate jury on safety especially in the eyes of public perception. It's very unfortunate that we seem to need to be assured of the strength of Tesla's vehicles during such tragic events, but we shouldn't ignore them either.

During an interview with CNBC earlier this year, Musk stated, "People realize that our car is in fact the safest car on the road. It has the lowest probability of injury of any car." Since Tesla doesn't spend a penny on advertising, this perception is of vital importance for its demand and sales.

Remember those battery fires late last year that the media trumpeted but proved to be overblown? Back in February in a conference call, Musk stated, "At first, we saw a significant drop in demand, and we were quite worried about it."

He then called it a "media-driven" thing and noted that sales have steadily improved since then. By "sales" he really meant orders since Tesla already sells every vehicle it produces due to its long backlog. I would expect demand or orders to pick up, even if just a little more, due to these latest accidents which are the latest confirmation of real-world safety.

Tesla Motors is working with the Los Angeles police and fire officials on investigating one of the incidents. Bloomberg reported that a company spokesperson stated, "There aren't so many S's involved in major crashes, and certainly not quite like this one, so we absolutely want to have a look to understand what happened."

The fact that in one of the accidents a vehicle crashed going nearly 100 miles per hour, split in half, and caught ablaze without killing the driver is something out of science fiction in terms of safety - at least that's how I "perceive" it, and I suspect so will the public. It will be interesting to learn what revelations Tesla Motors will have to report after this.

Disagree or have something positive or negative to add? Please comment below!

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.