Tesla Motors Inc (NASDAQ:TSLA) stock dropped by more 5.5% on today's market. The drop in the value of the firm follows its most recent earnings report, which appeared to disappoint the market, and the news that a third fire in a Tesla Motors Inc (NASDAQ:TSLA) Model S had been reported. The mass of safety-related headlines plaguing the company may be harming its brand image.
The Tesla Motors Inc (NASDAQ:TSLA) Model S fire is not the only performance issue hitting the company in recent days. A spate of reports complain of a strange noise coming from the car on acceleration and deceleraton. That problem was reported by Edmunds.com originally, and was picked up by the LA Times.
Tesla Model S fire
The latest fire in a Tesla Motors Inc (NASDAQ:TSLA) Model S was reported in Tenessee. The fire resulted from a driver running over a trailer hitch which fell off of another vehicle. The fire was controlled and the driver walked away without injury. The fire followed one close to Seattle and one in Mexico in recent weeks.
The three Model S fires involved car crashes, and all three allowed the driver to walk away without injury. All three stories show that the car is a safe machine, but the market isn't all that worried about how safe the Tesla Motors Inc (NASDAQ:TSLA) Model S is. They are worried about public perception.
If the public begins to believe that electric cars are more susceptible to fires than ordinary vehicles it may hurt adoption rates. That would hurt Tesla Motors Inc (NASDAQ:TSLA) sales, and could result in a massive drop in value.
According to the reviewer at Edmunds the Tesla Motors Inc (NASDAQ:TSLA) was “making an ominous noise under acceleration and deceleration. It originates from the rear of the car and seems to be getting worse.” Tesla replaced the part for the reviewer, but refused to explain where the problem originated from. If Tesla starts getting hit with complaints about the reliability of their vehicles, it might do more damage than the fire headlines.
Tesla Motors Inc (NASDAQ:TSLA) investors have lost more than 25% of their investment off of the high the company's shares hit in early October. The firm's stock is still up more than 300% since the start of 2013, however, so long term holders aren't suffering all that much for the full year.