Tesla Motors Inc (NASDAQ:TSLA) has had some recent fire troubles. Whether or not these troubles were actually Tesla’s fault is an argument for a different day. Needless to say, Wall Street has been very reactionary towards Tesla stock lately. For over a month it was on a slide. Then it was up. Then it was down. So what’s really going on? Are Tesla’s fire problems really something to worry about?
A bit of background
In early October, a Tesla Model S had an accident where a piece of road debris impacted the battery pack. The result was a fire that would be reverberating through Tesla’s stock for the next three months. Tesla handled the PR very well, issuing a statement, and explaining the event properly in a blog post. That would have been fine. The stock market reacted, as they always do, and the stock went down.
Then about two weeks later another Model S fire blazed up in Mexico, again from a battery fire. And then a month later there was another fire. At this point the stock tumbled from its peak - nearing $200 at the beginning of October - all the way down near $120 in late November.
That was the low point for Tesla's stock price since its explosion this summer. Since then it has rebounded on good news from the German Auto Authority, which found nothing wrong with the Model S in terms of structural problems. Fairly decent European sales have also help bolster the price.
Should Tesla investors be confident or worried?
So the question is, what’s next? Sometime next year, the US National Highway Safety Administration will present the findings of its investigation into the slew of fires. That will have a significant impact on Tesla Motors Inc (NASDAQ:TSLA)’s stock price. If they find no evidence that there’s anything wrong with the Model S from a structural stand point, we can expect the stock price to continue going up. If they do find something wrong, the price will come back down to earth.
In late 2014, Tesla Motors Inc (NASDAQ:TSLA) will finally bring the Model X to market. This, an SUV type EV, is based on the Model S wheel base, and will get similar range but carry more people. It is expected to cost around the same price as the Model S as well ($71,000 base price).
On Friday, Tesla Motors Inc (NASDAQ:TSLA) announced that it will be showing off a new, much cheaper, EV in 2015 at the Detroit International Auto Show. That vehicle will be smaller, yet based around the same design of the Model S, but cost much less (rumors have it in the $35-40,000 range).
That’s a lot to do in the next few years, and that doesn’t even include continuing to roll out its nationwide supercharger network. It also has to battle states for the right to sell vehicles directly to consumers.
So, if you’re an investor, what should be your outlook? If you’re looking at the big picture, Tesla stock might still a buy, if you think that EVs will be very hot in the next decade. The real question is, what will happen when Ford Motor Company (NYSE:F), General Motors Company (NYSE:GM), Toyota Motor Corporation (NYSE:TM) (TYO:7203) and other car manufacturers really get into the electric game? Yes, they all have small vehicles that are sold in some markets, but eventually they will start to take it all seriously.
Will Tesla Motors Inc (NASDAQ:TSLA)’s lead in this market save them from getting overshadowed once the big dogs come out to play? That all depends on the focus of the major car companies. If they focus solely on EVs, Tesla Motors Inc (NASDAQ:TSLA) might be in trouble. If they are more focused on self-driving and more autonomous cars, then Tesla might be okay. It’s all going to depend on where Tesla is when the others enter the market for real.
From an investor’s point of view, this is very interesting to watch. If your a risk taker, you want to be in on it early if they go huge like Google Inc (NASDAQ:GOOG). The best bet is to make sure Tesla fits into your strategy, and make sure you're following along with all the latest news so you can adjust your strategy accordingly.