Last week, a Tesla Model S in Kent, Washington had an accident that did more than take out one car — it threatened to bring down the company. The car wasn't merely wrecked, it burst into some healthy looking flames after hitting what was described as "a large metal object" that fell off a semi on the highway.
The accident lifted the car up and impaled it with a force of 25 tons, punching a three-inch hole through the Model S' armor plate (a quarter-inch thick). The driver was able to pull over and get out, but the car became engulfed in fire.
The news of a Tesla fire predictably caused the stock to plunge. It fell 10 percent to $173 (horrors) in two days of sell-offs. But then a funny thing happened — it went up again. Look at a five-day timeline and you can see the trough clearly, but then a gradually increasing momentum back up. As I write, a unit of Tesla stock will cost you $183. Of course, Tesla is so valuable now that the brief dip was enough to temporarily take $2.4 billion out of the company's value.
The biggest factor in Tesla's recovery was probably a single blog post from CEO Elon Musk, who basically walks on water with the investor community. "Had a conventional gasoline car encountered the same object on the highway, the result could have been far worse," Musk wrote. "A typical gasoline car only has a thin metal sheet protecting the underbody, leaving it vulnerable to destruction of the fuel supply lines or fuel tank, which causes a pool of gasoline to form and often burn the entire car to the ground."
Musk added, after pointing out that there are 150,000 car fires a year in the U.S., "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."
Forbes had some of the most astute commentary about this. "From what's known so far," it said, "this appears to be a case of a spectacular incident being used as an excuse to sell off a stock that has had a spectacular run." Indeed, lucky is the Tesla stock owner, unless he or she decided to sell right after the fire.
In case you were wondering, Rob Carlson, whose car is the one that burned in Kent, is hardly disillusioned with Tesla Motors. "I agree that the car performed very well under such an extreme test," he said. "The batteries went through a controlled burn which the Internet images really exaggerate. Anyway, I am still a big fan of your car and look forward to getting back into one… I was thinking this was bound to happen, just not to me." Of course, Carlson is also an investor in Tesla, so it's not likely he'd be making the stock go down any further.
You can see the car burn in the Youtube video below. Judge for yourself if the fire was exaggerated. Personally, if I was a Tesla investor, I'd stand pat.