Are Tesla’s Safety Concerns Blown out of Proportion?

Tesla (TSLA) has been under the microscope for increased safety concerns. Most of the recent cases involve battery and software update issues.

Tesla’s battery and software updates

Recently, Tesla has been facing heat for possible battery defects and software issues. Notably, these problems surfaced after several Tesla vehicles spontaneously burst into flames.

On October 24, The National Highway Traffic Safety Administration (or NHTSA) sent a letter to the company, stating that it planned to look into the battery software updates for Model X and Model S from 2012 to 2019. According to the letter, the alleged defects are “high-voltage battery fires that are not related to collision or impact damage to the battery pack.”

Autopilot and accidents

Notably, there have been several cases of fires in Tesla vehicles in the last few months. Last week, a doctor from Florida died in his Tesla Model S as the vehicle caught fire after crashing into a palm tree. According to the wrongful death lawsuit filed by his family, the vehicle’s futuristic design features were to blame rather than the crash. Plus, similar cases allege that battery fires caused accidents, some of them involving deaths.

There have been other cases that blame Tesla’s autopilot system for driver deaths. However, in most of the accidents involving the autopilot feature, the driver wasn’t paying attention. The company maintains that the “current Autopilot features require active driver supervision and do not make the vehicle autonomous.”

Reduction in battery range with software updates

Some Tesla owners have blamed the company for curtailing the battery range of older vehicles to avoid the costly recall of defective batteries. In August, Reuters detailed a lawsuit brought by a vehicle owner that was filed in Northern California federal court.

According to the lawsuit, “Under the guise of ‘safety’ and increasing the ‘longevity’ of the batteries of the Class Vehicles, Tesla fraudulently manipulated its software with the intent to avoid its duties and legal obligations to customers to fix, repair, or replace the batteries of the Class Vehicles, all of which Tesla knew were defective, yet failed to inform its customers of the defects.”

Undue attention to negative cases?

For any vehicle manufacturer, safety is of paramount importance. However, Tesla seems to get more attention than other companies of its size following an accident involving its vehicles. Due to excessive attention toward Tesla and CEO Elon Musk, even a minor accident makes headlines.

The Spring recently reported on Tesla’s third-quarter safety data. On autopilot, there was one crash every 3.34 million miles. According to data from the NHTSA, the US average was one crash every 492,000 miles.

Tesla’s profitability concerns

Apart from safety issues, another concern for Tesla is how it can achieve sustainable profitability. After the company’s surprise Q3 profits, some analysts have turned more positive. However, for a long-term, sustainable, and profitable path, the company needs to deliver on its growth projects. These projects include the China Gigafactory, Model Y, and a pickup truck that combines speed and smoothness.

Year-to-date, Tesla stock has lost 4.7% of its value. In comparison, the S&P 500 (SPY) and the Dow Jones Industrial Average Index (DIA) have registered gains of 23% and 17.8%, respectively. As we highlighted in Tesla Turnaround Catalysts: China and Model Y Progress, there are many positive catalysts for the company that we believe could turn the stock around.