Is Tesla Motors Inc. on the NHTSA's Hot Seat ... Again?

Forget road debris and fires. The real problem may be a 17-inch touchscreen.

Jan 26, 2014 at 11:00AM

Model S Photo Gallery

Tesla Motors Model S. Photo: Tesla Motors.

It's no secret that distracted drivers are dangerous. Consequently, the National Highway Traffic Safety Administration, or NHTSA, has issued a set of voluntary guidelines to help cut down on secondary tasks that it believes "interfere inherently with a driver's ability to safely control the vehicle." The list includes in-vehicle electronic devices the driver uses to perform secondary tasks such as navigation, communications, and entertainment.

But the guidelines are "voluntary," right? Well, according to StrategyAnalytics, Tesla Motors (NASDAQ:TSLA) might be facing the NHTSA's hot seat, again, because of its 17-inch touch display. Is this something Tesla investors should worry about?

Is it more than a rumor?
StrategyAnalytics states, "The word on the street is that prior to his formal resignation and departure from the National Highway Traffic Safety Administration (NHTSA) three weeks ago, [chief administrator David] Strickland initiated a preliminary investigation regarding Tesla's lack of cooperation regarding NHTSA's revised driver distraction guidelines." 

Model S Photo Gallery

Tesla Model S interior. Photo: Tesla Motors.

Further, StategyAnalystics, says: "The revised NHTSA guidelines govern everything from the display of images and text, to moving map images, scrolling lists, and manual text entry. The Tesla Model S allows drivers to freely browse the Internet, scroll lists, manually enter information, and view Web pages while driving – all on the vehicle's 17-inch touch display." 

Right now, we're dealing with just rumors, and StrategyAnalytics' attempts to reach the NHTSA for confirmation have gone answered -- as have my own attempts. However, if this rumor turns out to be true, here's what investors could expect.

A look in the crystal ball
In the short term, a new NHTSA investigation into Tesla could have an immediate, and negative, impact on Tesla's stock price. Remember that Tesla's stock price took a dive following the report of two vehicle fires associated with undercarriage strikes, after which the NHTSA opened a "preliminary evaluation to examine the potential risks associated with undercarriage strikes on model year 2013 Tesla Model S vehicles." 


Model S touchscreen. Photo: Wikimedia Commons.

However, if the NHTSA finds that Tesla's touchscreen interface is a serious distraction to drivers, even though the steering wheel also has controls that the driver can use, it's feasible that Tesla could remedy the problem by sending out an over-the-air update that disables the touchscreen while driving. Of course, any such update would depend on the NHTSA's findings, and Tesla's touchscreen technology.

Tesla's future
Based on Tesla's performance and history, it's doubtful that Tesla investors should be overly concerned by an investigation into the touchscreen. However, that's not to say Tesla is an investment without serious risk.

As I recently pointed out, the real risk to Tesla's future is its battery, and the fact that it's not nearly as environmentally friendly as one would initially expect. Plus, hydrogen fuel cell vehicles are getting ready to launch in America, which means BEVs could face increased competition. Consequently, while it's unlikely that a new NHTSA investigation into Tesla's touchscreen will have a lasting impact on Tesla's stock, that's not to say Tesla's bright future is guaranteed. Indeed, there are serious concerns with Tesla in the long term, and Tesla investors would do well to especially keep Tesla's battery problems in mind.

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Fool contributor Katie Spence has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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