Last week, after almost a year of unbeatable reviews and a rising stock price, Tesla Motors hit the skids.
In just six short days, the company released a weaker-than-expected earnings report, George Clooney gave his Tesla a bad review, and — most significantly by far — a third Model S burst into flames.
That's a lot for a baby car brand to take in one week. Though the earnings report was mostly positive, a couple unexpected blemishes overshadowed rising sales and production. In the third quarter, Tesla sold fewer zero emission certificates to other car makers — historically an important source of revenue for the company — and released a weaker-than-predicted projection for future results.
In just three hours after the release, the stock dropped $20, more than 11 percent.
Then Clooney spoke up. In a profile for the December issue of Esquire, the actor said:
“I had a Tesla. I was one of the first cats with a Tesla. I think I was, like, number five on the list. But I’m telling you, I’ve been on the side of the road a while in that thing. And I said to them, ‘Look, guys, why am I always stuck on the side of the fucking road? Make it work, one way or another.’ ” [Esquire]
Clooney's diss might not have smarted so much if it wasn't bolstered by recent news events: Last week, the third Tesla sedan in six weeks burst into flames near Smyrna, Tenn. With only about 19,000 Teslas on the road, a third fire was enough to spark an investigation by the The National Highway Traffic Safety Administration. Megan McArdle at Bloomberg explains why this is troubling:
Even if it turns out nothing is wrong with its engineering, Tesla could be in big trouble. Small, new companies are extraordinarily vulnerable to stories like this; they don’t have brand loyalty, and a history of reliable products, to carry them through rumors, much less bad engineering decisions. [Bloomberg]
"If the government actually finds a design flaw, consumers may be unlikely to give Tesla a second chance to do it right," says McArdle.
But Daniel Gross at The Daily Beast says Tesla's troubles — even the combustible sedans — are just a bump in the road:
Car purchases aren’t always about economic rationality and functionality. People buy vehicles because they’re status symbols, or because they want to express themselves, or because certain cars function as cultural markers and personal advertisements. Just as driving a Hummer marked you as a certain kind of person in 2005, driving a Tesla marks you as a certain kind of person in 2013. Owners prowl around wealthy suburbs announcing themselves as wealthy, carbon-free, early adopters with money to burn. People who can’t afford a Tesla but still love what the company stands for, purchase Tesla’s stock out of the same impulse. Some raving fans do both.
And no blow-up — financial or physical — will deter them. [The Daily Beast]