Will the Latest Tesla Fire Provoke the Typical Hysteria?

Tesla (11) (640x360)

Tesla (NASDAQ:TSLA) Chief Executive Elon Musk has expressed his frustration at media coverage of fires occurring in his company’s vehicles in the past. Now that a Toronto fire from early February has been reported by Business Insider, it’s fair to ask whether the coverage will provoke the typical hysteria in the media and the corresponding fall in stock prices. That is, until the company or Musk himself responds publicly to the issue and the stock returns to its previous highs (or beyond).

The circumstances surrounding the latest Model S fire are easy to summarize. On February 1, 2014, a Toronto Tesla owner parked his Model S in the garage of his home.  According to Business Insider, the car caught fire and set off the alarm inside the home “after a few moments.” The car was not charging and was not plugged into an electrical outlet. It was a simply a parked car that caught fire on its own.

The report noted that the fire was intense but contained by firefighters quickly. Business Insider reports Tesla employees went to the Toronto house to offer reparations for the damage but the owner declined. A Tesla statement addressing the incident acknowledged the fire and reiterated the position that, while dealing with “occasional fires” is something every automaker must do, gasoline car companies have to do it between five and ten times more often than Tesla.

That’s a fair point for Tesla to make, and Musk has made it several times. In a November 2013 blog post, Musk lamented how “an onslaught of popular and financial media” had been portraying fires in a sensationalistic manner when fires in combustion-engine cars were happening much more frequently. Not only were the fires much more common in gasoline-powered cars, they were often deadly as well, Musk wrote.

source: http://www.flickr.com/photos/supertsai/

Source: http://www.flickr.com/photos/supertsai/

Highlighting a total of four fires in Tesla’s electric vehicles so often in the media would seem to place an unfair burden on the Model S and the electric vehicle industry as a whole. However, since Tesla gained 400 percent in a year and one share of Tesla stock costs more than shares of Ford (NYSE:F), GM (NYSE:GM), Chrysler/Fiat (FIATY.PK) and Toyota (NYSE:TM) added together, Musk should understand the higher level of  interest in his company. To paraphrase James Carville: It’s the money, stupid.

Each announcement of fires has led to fluctuations in Tesla’s stock prices. In one case, the dip equaled 10 percent of the stock’s value. Was it the media coverage or the actual fires that lead to drops in Tesla stock? Do Musk’s rebuttals to the media provoke an unnatural correction in the stock? There’s a case to be made for both sides.

Looking at Musk’s November blog post, the Tesla chief executive offered praise for “journalists with deep knowledge of the car industry” as well as “the investigative journalists who took the time to research and write an accurate article.”

The reference to the worthy investigative journalist linked to an article titled, “Why Elon Musk is right to fight the media,” written by Hamish McKenzie. Tesla enthusiasts may recognize the name. In late January, McKenzie was the lead writer documenting the Tesla cross-country trip that showcased its Supercharger network. Needless to say, Musk won’t be able to point to McKenzie as an independent source in the future.

Market activity during the week of February 17 will reflect whether the latest Tesla fire does provoke a hysteria of major or minor proportions. The fact is there’s a lot of money at stake. Those who have invested in Tesla dispassionately are just as entwined in the company’s public perception as those who work for and run the pioneering electric car maker, not to mention those who simply want green cars to succeed in order to help cut down on carbon emissions.

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