Though the National Highway Traffic Safety Administration hasn't yet provided Tesla (NASDAQ:TSLA) feedback on its investigation into Tesla Model S battery fires, it has reaffirmed that the car is the safest car ever sold in the United States. Notably, making such an affirmation just weeks or even days before announcing its conclusion on the investigation suggests that the safety agency probably won't request that Tesla make changes that would require a recall.
The safest car ever
In April, the NHTSA gave Tesla's luxury sedan the highest-ever overall vehicle safety score. Though scores the agency shares with consumers only go up to five stars, safety levels beyond five stares are provided to manufacturers; Tesla's overall Vehicle Safety Score was 5.4, Tesla says. Importantly, the Model S also scored five stars in every subcategory.
This was a considerable achievement. Tesla explained:
Of all vehicles tested, including every major make and model approved for sale in the United States, the Model S set a new record for the lowest likelihood of injury to occupants. While the Model S is a sedan, it also exceeded the safety score of all SUVs and minivans.
But when you're at the top, you're also in the limelight. In a period of five weeks, Tesla's Model S experienced three battery fires as a result of high-speed collisions, and the news made headlines everywhere. In response, Tesla CEO Elon Musk passionately informed the media just how much coverage the Model S fires received.
Since the Model S went into production last year, there have been more than a quarter million gasoline car fires in the United States alone, resulting in over 400 deaths and approximately 1,200 serious injuries (extrapolating 2012 NFPA data). However, the three Model S fires, which only occurred after very high-speed collisions and caused no serious injuries or deaths, received more national headlines than all 250,000+ gasoline fires combined.
And now Tesla is back to the blog with news again. The Model S, according to the NHTSA, is still the safest car in America. Though NHTSA hasn't provided comments on the fire yet, it is confident enough in the vehicle to reaffirm its safety rating of five stars in every subcategory.
Not worth stressing
The fires aren't any reason for investors to be concerned. And despite a sell-off from levels above 190 before the fires, it looks like the market isn't stressing, either. Trading at 10 times sales, Tesla's valuation dwarfs other auto companies such as Ford and General Motors, who both trade at 0.4 times sales. It's irrefutable: The market has big expectations for Tesla.
The lack of concern for the fires makes sense. As Tesla explained in the new press release highlighting NHTSA's decision to reaffirm the score, statistics back up the rating.
- Owners of Model S are five times less likely to experience a vehicle fire than owners of the average gasoline car.
- There has been zero reported serious injuries or deaths in any Model S for any reason despite over 100 million miles driven.
- The Model S has the "best safety track record of any car on the road," according to Tesla.
It's also worth noting that it's been over a month without any new reports of more fires since the three battery fires.
Though there never really was a reason for investors to alter their thesis for Tesla stock, the reaffirmation from NHTSA is yet more evidence the fires are nothing more than an item for investors to keep an eye on, and not a reason to sell the stock.