Tesla Motors (NASDAQ: TSLA ) is always fun to follow. Last week was packed with drama for the automaker: a passionate blog post, defensive tweets, a dubious claim, and a bit of sarcasm. All of this Tesla drama happened to be centered primarily around a single story about the company's battery fires and NHTSA's decision to open up an investigation to look into the fires. Amidst all the noise, here are the recent developments regarding the fires that could benefit from some commentary.
Tesla CEO Elon Musk. Source: Screenshot from Tesla video of battery swap demonstration.
Tesla's CEO says a recall is unlikely
A few weeks ago, after all three fires, Tesla CEO Elon Musk said in an interview at The New York Times DealBook conference that "There's definitely not going to be a recall." Notably, however, Musk's language has toned down slightly in his more recent public statements. "... [We] think it is highly unlikely ... [that] something is discovered that would result in a material improvement in occupant fire safety," Musk said in a recent company blog post.
With no injuries from fires and a rating from the NHTSA as the safest car ever tested in the U.S., Musk has a solid chance of turning out to be correct. But, of course, it's also possible that the NHTSA could decide there is a design defect that could require a recall.
Who is right? Musk or Strickland?
Tesla's passionate blog post in defense of "an onslaught of popular and financial media seeking to make a sensation out of something that a simple Google search would reveal to be false" sparked hundreds of headlines, but one line in particular ignited some confusion and controversy.
In the blog post, Musk clearly indicated that he requested the NHTSA to conduct an investigation into the company's batteries. But on Tuesday NHTSA administrator David Strickland denied that Musk ever requested such an investigation.
Here's Musk's side of the story:
[W]e have requested that the National Highway Traffic Safety Administration conduct a full investigation as soon as possible into the fire incidents ... Given that the incidence of fires in the Model S is far lower than combustion cars and that there have been no resulting injuries, this did not at first seem like a good use of NHTSA's time compared to the hundreds of gasoline fire deaths per year that warrant their attention.
But if Strickland flatly denies the company ever made such a request, who is telling the truth?
It's likely that the confusion surfaced at some point last Friday when, according to a tweet from Musk, Tesla's VP of regulatory affairs, Jim Chen, invited NHTSA senior staff to conduct a review of the Model S.
On Friday last week, Tesla VP of Regulatory Affairs, Jim Chen, invited NHTSA senior staff to conduct a review of Model S
— Elon Musk (@elonmusk) November 19, 2013
Friday also happens to be the day of NHTSA's preliminary analysis resume for an investigation into Tesla's battery fires. Perhaps Musk asked Chen to invite the NHTSA to review the Model S hoping that the NHTSA would open an investigation. In fact, if the NHTSA wasn't already planning on conducting a review on that Friday, it could be argued that the investigation is a result of Musk's persistence.
But does it matter?
So, there may or may not be a recall and Elon Musk may or may not have made an inaccurate claim about the company requesting an investigation from the NHTSA. Is this really necessary information for investors to follow? Sure, these developments are worth keeping an eye on. But none of this noise is worthy of changing an investors underlying thesis for Tesla's long-term prospects.
Yes, Musk has responded aggressively to negative headlines surrounding the company's fires -- maybe even too aggressively. But it's this extreme personality that has helped Musk take Tesla from zero cars ever sold to its current limited rate of sales of more than 5,000 per quarter. It's this edgy determination that will help Tesla eventually bring to market its much anticipated affordable car for the masses.
As I explained recently, investors should keep an eye on developments like these, but they should also remember to keep the noise in perspective and their focus on the big picture items that affect a company's long-term prospects. If anything, the big picture takeaway here is not the investigation -- it's that Musk is as passionate and confident as ever about the future of his company.
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Report this Comment On November 26, 2013, at 12:54 PM, Decoy0527 wrote:
You are still in doubt about whether or not Elon made an inaccurate claim about the investigation request, but not many other people are. Elon tried to spin a situation and it backfired. He is beginning to get a history of over the top, and apparently off the cuff, comments. Remember the cash flow positive tweet which did not mention that it was for a one week (meaningless) time period? And what is with his new proclamation that Tesla will pay off owners whose Model S catches on fire? Did he even consult his lawyers, his auditors, his board of directors? Does that mean if an unhappy Tesla owner torches his car he just calls up Elon and says send me my check? Elon is just getting too weird for me and a bunch of others also.
Report this Comment On November 26, 2013, at 1:38 PM, weaponz wrote:
Decoy0527- You have no clue what you are talking about and making negative assumptions without doing any research.
1) Tesla made a request for the investigation there is little doubt about it because Tesla made the announcement prior to the NHTSA. Strickland fyi only handles policy, not day to day operations. Tesla wants the NHTSA to investigate because it would help clear up Tesla's brand.
2) I am not sure what tweet your talking about, but Tesla is currently cashflow positive. That said, are you seriously looking for meaning on twitter?
3) And the new proclamation is to instill confidence to consumers. It covers that in even of an ACCIDENT, Tesla will pay for the battery. If an owner torches his car, that is intentional and would not be covered. It has to be an accident to qualify.
He is not being weird, it is actually quite simple and logical. Look at it this way, in an event of a fire from a crash, only 1 out of 16 compartments would be on fire due to a firewall separating each compartment. For insurance and consumer, it would most likely have to buy a new battery which is expensive. For Tesla, they can just take the remaining battery and use it as a refurb or stationary power for superchargers as the remaining 15/16 battery cells are as good as new/slightly used. Assuming battery costs 20-40k per battery, the risk to Tesla is 1.25k - 2.5k. Which is pretty insignificant.
Report this Comment On November 26, 2013, at 6:55 PM, BillMarshall995 wrote:
The entire car underside of the car between the front and rear wheels is a sheetcake of batteries that if DENTED could cause the battery to short out and catch fire., maybe even hours later when it is parked in a garage and the children are sleeping. They are protected by the thickness of a stop sign that gets dented from kids with pellet guns.
There will be either a recall or a voluntary recall to add non metallic webbing/insulation to the underside of the car to lift it away from a collision with something in the road or a curb.
Also, his bragging about fire safety is false.... he is comparing his 2012 car with 40 years of still registered cars on the road. Let him compare apples and apples, How many 2012 Mercedes S classes and BMW and audi 8 series caught fire? How many top of the line caddys and Lincolns?
And lastly, Why does the Tesla have such an elaborate fire warning system if the threat is so minute?
Musk sounds like Obama defending Obamacare.
Report this Comment On November 26, 2013, at 10:05 PM, dannystrong wrote:
… and the bob-and-weave to preserve the stock price goes on. The Fool continues to love Tesla, but changes its greatest-thing-ever to long-term-sell-your-house-and-buy-this-stock-ignore-your-lying-eyes.
Tesla continues to announce profits that aren't (e.g. reporting a $38M loss as a $16M profit Q3, a $30M loss as a $20M profit Q2), and uses accounting tricks like declaring reselling Zero-Emission tax credits to other manufacturers as income. (The moral reprehensibility of such behavior is, apparently, beside the point.)
Its a giant pyramid scheme that the Fool, it seems, is greatly enamored with, even more so since the Fool owns Tesla stock, and thus has a vested interest in propping it up.
Report this Comment On November 26, 2013, at 11:21 PM, undefined8 wrote:
BillMarshall995 - google image search "audi 8 series fire" and it doesn't look very pretty. It certainly seems fair to say the Model S fires are limited to significant impacts to the undercarriage in high-speed situations. There have been numerous major accidents with no fire as well.
Also I don't know where you live, but here stop signs aren't 1/4" thick like the Model S battery armor, more in the millimeters.
I expect that Tesla should and will increase the battery armor just to appease the irrational public.
I'm a Model S owner and a future shareholder. I'm personally happy about the media coverage because it will give me a nice entry point, I'm jumping in at 110 next week and full-throttle under 100 which I expect mid January.
Report this Comment On November 27, 2013, at 8:04 AM, drax7 wrote:
Tesla is going to be up there with the best thing that happened to the USA this century, just my prediction.
The fear of their success is palpable , it could disrupt entire industries, this is creative destruction at its best.
Report this Comment On November 28, 2013, at 4:51 AM, betanico wrote:
Tesla has Cash flow problems.
Tesla has low profit margins on these car - they make money on carbon credits - not the cars
Tesla is a fad - only - even if they come up with the SUV or the supposed cheaper version (if they have enough cash flow to make one) - the profit margin will still be low.
Tesla has production problems (lack enough battery supply from Panasonic)
Tesla has only one model - one MODEL!!! - if there is a recall - that 1 model they can't afford not to sell for even a month. They have no other source of money (except carbon credits).
So to sum it all up - regardless of Elon's arrogance...Tesla is really just worth $50. So to people who want to buy into his pyramid scheme - go ahead - buy at 110. Buy a lot. Pray it will go back to a whopping 200+ dollars. LOL. Tesla aint Apple. They are not selling 1,000 to 2,000 dollar computers - they are selling $70-100,000 dollar car which only a few can afford. Sure they have excellent consumer reports and excellent customer satisfaction - But frankly even though I can afford to buy a Tesla car - I won't - The design is just plain for me. I think it has wow factor inside, pretty sure its quite and handles well - but in the end - its not a keeper.
By the way, I don't predict a recall - but NHTSA - will say due to inherent design - the risk of fire after a hit undercarriage is higher that any car ( Tesla know this hence they already moved the ground clearance by an inch). Buyer beware. - then Tesla stock - nose dives to$50
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