Last week was another difficult week for Tesla Motors (NASDAQ:TSLA) and its public valuation, as three vehicle fires ultimately spurred the National Highway Traffic Safety Administration to act by opening a formal investigation into the cars, to ensure that the incidents were not the result of some engineering misstep on the part of the electric vehicle company.
Tesla CEO Elon Musk says that the company actually requested that the NHTSA perform an investigation to quell the argument that electric cars are inherently unsafe, as a green-light from the NHTSA would dispel critiques that Tesla was knowingly selling cars that were not as safe as more conventional vehicles despite the top safety ratings that the Model S has garnered.
However, the stock swing brought Tesla’s astronomical valuation down to what analysts and observers likely consider to be a more stable range, and one more fitting of Tesla’s size. After a couple of thoroughly impressive quarterly reports earlier in the year, Tesla’s stock soared to enormous bubble proportions, to the point that justification of the manufacturer’s public value was seen as several years out.
However, last week, while the stock still rolled downhill after being sparked by a quarterly report earlier in the month that disappointed the more bullish investors, there was one diamond in the rough that the team at The Motley Fool picked up on as a needed positive for the company.
Consumer Reports said last week that the Model S sedan placed first in its customer satisfaction rankings, topping General Motors’s (NYSE:GM) Chevrolet Volt, which was last year’s winner and the winner in 2011. Fool contributor John Rosevear took a second to dissect exactly what Tesla’s “badly needed win” meant for the company in a video posted to the Fool’s blog.
Rosevear notes that the Tesla took first place with “the highest score that the magazine had seen in many years,” as the Model S scored a 99 out of 100 with its customer satisfaction survey. This matches the 99 out of 100 score the magazine awarded the car in its own testing, one of the highest scores ever awarded by the publication.
“So what’s the deal here?” Rosevear asks. “Consumer Reports says that the vehicles that inspire the strongest customer satisfaction scores, the strongest loyalty scores, are the ones that are — and I’m quoting here — ‘ones that are fun to drive, deliver great fuel economy, are fashionably green, or will envelop you in a high-tech luxurious driving environment.’”
He adds: “The magazine notes that the Model S provides all of those attributes in one car,” pointing out that the second-place finisher was the Porsche Boxster. In third was the Chevy Volt, Rosevear says.
But do these kinds of customer satisfaction rankings actually matter? Rosevear argues that yes, they do — at least in this sense. “Tesla CEO Elon Musk often says that word of mouth is is Tesla’s best marketing: If owners really love their Teslas, and if you talk to any owners or look at these rankings, which suggests that certainly most of them do, they’ll tell friends, they’ll tell everybody and that will drive more purchases,” Rosevear contends.
This, in turn, gives the brand more credibility, and more people will step up and say “Hey, I want one of these too,” he notes.
“People buying Teslas now aren’t doing it because they went to three dealers and they got the better deal on the Tesla than they did at the Lexus dealer down the street — they’re buying it because they’re enthusiastic about Tesla, about the technology, about the company, about the car. That dynamic has also been true about Chevy Volt fans,” Rosevear concludes.