Blog Post

The Tesla fire and the perception problem

Three and a half years ago, then-scrappy electric car startup Tesla (s tsla) went public at $17 per share, on sales of less than 1,000 cars and a deficit of $236.4 million. When the stock market sent Tesla’s shares soaring on the day of the IPO, one thing was clear to me about Tesla: branding was everything.

Now that Tesla has started making its second car at scale, it has delivered a quarter profit for the first time, and its shares have traded at a high of almost $195 per share, branding is still everything for Tesla. That’s why the viral video of one of Tesla’s Model S cars burning could be an actual problem for Tesla.

Tesla Model STesla’s Model S has been rated as the safest car out there by the National Highway Traffic Safety Administration (NHTSA). The Model S that’s shown in the video in flames hit some metal debris on a freeway and Tesla says the fire started in one of the modules in the battery pack. The pack fire, as it turns out, was also difficult to put out.

But whether or not an internal combustion car would have had a reaction on par to the Model S when it directly hit some metal debris (or ignited the fuel tank in some way), isn’t really the question. The issue is how much damage can a viral video of a Model S on fire do to Tesla’s valuable brand.

Investors reacted to the fiery inferno, and already bubbly stock, and it dropped down to $168 per share at one point, though recovered a bit in the afternoon. It’s now trading around $175 per share.

Tesla logo on the Model X
Tesla logo on the Model X

Will customers be worried about Model S cars catching on fire after collisions? And will that effect sales at all? An investigation in a couple of fires during safety testing with Chevy’s Volt back in 2011, seem to contribute to a considerable freeze in Volt sales for awhile. Fires certainly weren’t great publicity for Fisker’s electric cars back when those were on sale.

Large companies with diverse product lines can weather branding and publicity issues more easily than startups that have one product on the market. If that one product turns sour, there’s nothing else out there to prop up the brand.

But this fire issue could end up being another hurdle Tesla jumps over. Cars get in accidents, and bad things happen in accidents. But the company will likely have to work on its own PR campaign to be transparent but also soothe any worried customers. And the good news is that Tesla has always been particularly adept at PR and marketing, so expect some type of reaction, and soon.

13 Responses to “The Tesla fire and the perception problem”

  1. I do not own a Tesla (have a Nissan Leaf because it is more in my affordable range), however I don’t think this will be an issue for them due to the unique circumstances. From what I’ve read these cars are amazing although I do have few reasons I prefer Nissan’s approach to electrics than what Tesla is doing (mainly simplicity of design so less can go wrong). But this issue should not deter people from Tesla since all of today’s cars are amazingly complex and there is always a crib death period for any design. To be honest only the cost deterred me from getting a Tesla Model S. Electrics are the way to go, in my particular case I’m averaging 2.5 cents/mile in driving costs and only need to have a battery check once per year. Maintenance is so much easier on the budget than a fuel based car.

  2. Really Katie, did not have anything better to do? Whose perception? Yours, because you cant afford one and therefore trying to find reasons to knock Tesla down?

    No Tesla owner will agree with you. No thinking person will agree with you. “Could be a significant issue for the companies brand”…. really.

    I need to write an article. Katie Fehrenbacher and Gigaoms delusions COULD lead to Gigaom going defunct. It really is a perception problem, because most people actually thought this website had articles written by those who had brains.Oh wait , they were wrong and there is no perception problem. Change your name to FoxNewsOm or Gigafox and be done with it. Thank you.

  3. Ron Larson

    It might be smart for Telsa to add an automatic fire suppression system the deploys when a major accident is detected. Perhaps the same system that triggers the airbags. And add fire sensor inputs to the trigger.

    That way if a Telsa rips apart, it will lay down a nice layer of foam with the parts all over the road.

  4. The author needs to correct this article. There was ONE fire with the Volt, and it happened WEEKS after the crash test which set off the chain reaction causing the fire. The author could even provide the further context that the car was actually in the storage yard when the fire happened and no one was even close the car when it happened.

  5. revdjenk

    In case anyone doubts some of the comments above, I am a survivor of one of those “normal” powered car fires. There was no accident, but some sort of relay failure which led to the fire starting in the dashboard area. I have carried fire extinguishers in my autos ever since!

  6. Over the last 3 years there were 187,500 auto fires resulting in 270 fatalities and over 1,000 injuries. That’s a massive improvement on 1980 when there were 456,000 fires and 650 deaths..

    Tesla account for 0.0005% of annual average auto fires, yet their sales represent 0.133% of all vehicle sales.

    Is the media out stalking which brands cause the other 99.99% of auto fires??? Probably not because fires are recognized as a know risk of driving an ICE powered vehicle that carts around up to 100 litres of a HIGHLY FLAMMABLE fuel with 10x the energy of any battery EV!

  7. It caught on fire, and guess what: No risk of explosion. With a gas-vehicle, you’d have to worry about the damn thing blowing up. Even getting as close to it as the person who took the video was would be dangerous.

    Thousands of gas-vehicles caught on fire this year as well. Just in May, a car exploded in my home town of Vancouver. The culprit, of course, being gas. Yet nobody suddenly started questioning gas-powered vehicles. No big news stories about the car company’s stock dropping.

    Tesla is becoming very successful. So of course, every media outlet that’s owned by somebody with an interest in keeping oil money flowing is jumping on the chance to discredit them.

  8. No, not worried about my battery pack. The man walked away, and this is not the first time a Model S has been in an accident. Let no one forget that over 150,000 vehicle fires occur each year, and only 4% of those were in accidents. Those are the rolling bombs that most people drive. So my question is: why the heck isn’t everyone driving a safe electric car?