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Why That Infamous Fire Hasn't Burned Tesla

While everyone is discussing the recent sell-off of Tesla Motors (NASDAQ: TSLA  ) shares, and the two fires that seem to have initiated it, no one is talking about the actual impact of those fires on the business of selling cars. Until now.

In a recent interview with German media, Elon Musk confirmed that initially, the report of the first fire hurt sales. But after Musk posted a statement affirming his beliefs in the safety of electric cars, sales went up -- and stabilized at higher levels than before the fire.

Cool your jets
The blog post can be summarize by its conclusion: "For consumers concerned about fire risk, there should be absolutely zero doubt that it is safer to power a car with a battery than a large tank of highly flammable liquid." The post has been quoted by a number of media and will likely be remembered as a great PR maneuver, but the stock price still took a hit.

Most mainstream media, if not all, did not pick up the interview in which Tesla's CEO confirms the efficacy of his blog post and its positive effect on the sales of the Model S.

Since then, a second Model S has gone up in flames, after the driver lost control of his car in a roundabout and crashed it.

Liz Jarvis-Shean, a spokeswoman for Tesla, confirmed the accident to Bloomberg: "We were able to contact the driver quickly and are pleased that he is safe. This was a significant accident where the car was traveling at such a high speed that it smashed through a concrete wall and then hit a large tree, yet the driver walked away from the car with no permanent injury." You can't really blame a car for going up in flames after it went through a concrete wall and hit a tree.

The cold, hard numbers
It's fascinating to see such trivial incidents getting so much attention from news outlets, considering that in the U.S., 187,500 highway vehicle fires have been reported in 2011 alone. More than 200 persons died in those fires, and a little more than 1,000 were injured, according to the National Fire Protection Association.Technically speaking, Tesla Motors still stands on the right side of those statistics.

To top it off, regulators from the National Highway Traffic Safety Administration concluded last week that the car reacted correctly and wasn't to blame for the first accident. It is unlikely they will be able to investigate the second fire, because it happened in Mexico.

As Tesla delivers more and more cars, they will inevitably be more fires caused by crashes. It will be interesting to see how much of those fires, assuming they are not spontaneous, will make the news again and affect Tesla's stock price. 

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 01, 2013, at 9:50 AM, damilkman wrote:

    I mentioned this in another article. When a stock is a momentum play irrational news has an impact on the impact of a stock. It is part of the buisness. The stock will jump 15% if Musk announces he is expanding coverage of the Super Charger network to Antartica and it will drop 20% if penguins protest the implementation.

  • Report this Comment On November 01, 2013, at 12:09 PM, SteveTG3 wrote:

    Wow, thanks for sharing the link to the interview. Sales now up higher than before the fire. fwiw, discussion of this starts 14:16 into the interview.

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