Is Tesla's Recent Setback a Sign of Trouble to Come?
Tesla Motors is one of this year's best-performing stocks, thanks to its fast-selling Model S sedan and outspoken CEO, Elon Musk. However, that wasn't enough to stop the stock from suffering its worst monthly decline in nearly three years, last month. Tesla shares plummeted more than 17% in October following, not one, but two Tesla Model S fires. Let's look under Tesla's hood to find out whether investors are right to worry about the EV maker going forward.
In the line of fire
Tesla's stock isn't the only thing that's been on fire lately -- so have its cars. The Model S, which earned a five-star safety rating in all categories, faced two separate incidents last month in which the vehicle caught fire after a collision. However, based on national statistics, your car is less likely to catch fire if it's a Tesla versus a conventional gas-powered car.
Specifically, nationwide driving statistics indicate that there is one car fire for every 20 million miles driven, whereas Tesla has encounter one fire in over 100 million miles, according to Musk. He went on to say: "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."
As an additional safety feature, Tesla's cars have an onboard alert system in place that notifies the driver to exit the car in case of an emergency. Additionally, the battery packs are contained by internal firewalls that will stop a fire from spreading to the passenger's compartment. Moreover, both of the Tesla drivers involved in the recent fires have already ordered new Model S cars.
Robert Carlson is still bullish on Tesla, even though his Model S caught fire last month after being struck by a metal object. In a note to the company's VP of sales, Carlson wrote: "I am still a big fan of your car and look forward to getting back into one. ... I am also an investor and have to say that the response I am observing is really supportive of the future for electric vehicles."
Setback? What setback?
The National Highway Traffic Safety Administration has since declared that the Tesla fires were not the result of a safety defect. Once again, Musk and his company prove they can roll with the punches. Nevertheless, it's important that shareholders remember that Tesla is still in its infancy. There will certainly be more hiccups along the road, perhaps even more fires. However, with Musk at the helm, Tesla will continue to turn obstructions into opportunities.
Investors will get more insight into the health of Tesla's business when the company reports its third-quarter earnings after the bell on Tuesday.
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The article Is Tesla's Recent Setback a Sign of Trouble to Come? originally appeared on Fool.com.Fool contributor Tamara Rutter owns shares of Tesla Motors. 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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