Tesla: Will Top Safety Award Silence Critics?


Mar. 5 2020, Updated 6:02 p.m. ET

Last year, the Tesla (TSLA) Model 3 earned a five-star safety rating from the NHTSA (National Highway Traffic Safety Administration).

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Tesla’s safety rating from the NHTSA

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In response, the company said, “Now, not only has Model 3 achieved a perfect 5-star safety rating in every category and sub-category, but NHTSA’s tests also show that it has the lowest probability of injury of all cars the safety agency has ever tested.” Tesla received a subpoena from the NHTSA regarding its Model 3 safety claims. The NHTSA noted that the company’s use of the NHTSA five-star rating isn’t consistent with its rules.

Model 3 earned top safety rating from the IIHS

However, the Tesla Model 3 also received a top safety rating from the IIHS (Insurance Institute of Highway Safety). The IIHS reported that Model 3 received its first top safety pick+, which is the highest rating. Notably, the IIHS explained the qualities that a vehicle needs to earn the award.

The qualities include “good ratings in the driver-side small overlap front, moderate overlap front, side, roof strength and head restraint tests, as well as a good or acceptable rating in the passenger-side small overlap test. It also needs an available front crash prevention system with an advanced or superior rating and good- or acceptable-rated headlights.”

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Tesla Model 3 got good ratings across the board  

The IIHS added that the Tesla Model 3 “earns good ratings across the board for crashworthiness.” Previously, the IIHS tested Model S in 2017. However, Model S didn’t get the top safety rank. Model S’s performance only received an acceptable rating. The IIHS noted that “the seat belt allowed excessive forward excursion of the head and torso.”

Audi e-Tron and Hyundai Nexo  

The Tesla Model 3 is the second plug-in vehicle to receive the award in 2019. The Audi e-Tron earned the award in August. The Hyundai Nexo, a hydrogen fuel cell vehicle, also made the cut for the top safety award from the IIHS in 2019.

The IIHS also noted that the Chevrolet Bolt didn’t get the award due to its headlights, which “cause too much glare, earning a poor rating.”

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Which features enabled the top safety rank?

On Tesla’s blog post, the company discussed the features and ways in which the award was made possible. The company said that its all-electric powertrain design reduces roll-over risk. Tesla also mentioned that the aluminum and steel passenger cabin “provides exceptional strength to equally protect drivers and passengers.” Also, a lack of an engine helps the car absorb energy more effectively compared to a car with an internal combustion engine. The post said, “We’re also committed to making our cars even safer over time via over-the-air updates.”

Tesla offers lower insurance rates 

Last month, the company launched its own insurance service in California. The press release said that the insurance service is “designed to provide Tesla owners with up to 20% lower rates, and in some cases as much as 30%.” The press release also said, “This pricing reflects the benefits of Tesla’s active safety and advanced driver assistance features that come standard on all new Tesla vehicles.”

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Critics and accidents 

The top award from the insurance industry might silence some of Tesla’s critics who make a big deal out of every crash involving Tesla cars. Due to excessive attention towards Tesla and CEO Elon Musk, even a minor accident involving the company makes headlines. However, most of the accidents might be due to the autopilot feature. Usually, the driver wasn’t paying attention. Tesla maintains that the “current Autopilot features require active driver supervision and do not make the vehicle autonomous.”

Tesla’s stock performance

Apart from safety concerns, many investors wonder if Tesla will reach a sustainable profitability level. Year-to-date, the stock has lost about 27% of its value. The stock has significantly underperformed the S&P 500 (SPY) and the Dow Jones Industrial Average (DIA). SPY and DIA have gained 20.5% and 16.6% during the same period. So far, Ford and General Motors have gained nearly 21% and 14%, respectively, this year.

However, Tesla stock has many positive catalysts that could provide upside going forward. The company sees increased production in China and the Model Y ramp-up in 2020 as significant upside catalysts. To learn more, read Tesla Turnaround Catalysts: China and Model Y Progress. Also, many analysts think that the stock is undervalued. To learn more, read Tesla Stock: Why Analysts Think It’s Undervalued.

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