Bad year for Tesla, and it might be getting worse as stock follows reputational crash


Tesla Motors seems to have promise for its advanced electric cars with projected sales this year of 14,500 vehicles. But it hasn’t been easy and the company may be in its worst crisis yet.

If there’s any doubt about the linkage between a company’s reputation and its capitalization, look at what Tesla’s stock did this week — down 10.6 percent as of today’s open. Why?

The year started with a controversial and negative review in the New York Times after a test-drive.

But it got immeasurably worse this week when a Tesla caught fire on a highway south of Seattle after its lithium-ion battery — yes, the same kind that gave Boeing’s new Dreamliner fits — caught fire.

The Yahoo! story makes the point:

“The bar is much higher for Tesla,” said James Albertine, analyst at Stifel, Nicolaus & Co, who has a “hold” rating on Tesla shares.

“Tesla cannot weather a sustained onslaught of consumer complaints and incidents that could potentially dent the demand curve for the next vehicle.”

Certainly, this is not at a point of desperation, but it’s not helpful either.

Given that Tesla’s Model S and the discontinued Roadster have been driven a combined 113 million miles and that this was the first battery fire, the company’s rate of catching fire was still only one-tenth the frequency of conventional car fires … Tesla officials said the battery and the car worked as designed, keeping the fire under control and allowing the driver time to pull over and safely exit the vehicle.

The company has hit the right marks in response. Its CEO and other officials worked hard to fight back against the Times’ John M. Broder resulted in a follow-up, response story, as well as comment by the papers public editor, Margaret Sullivan.

In the current case, spokespeople were available and commented, pushing back with facts designed to make this fire seem a fluke. But as Albertine notes above, because Tesla is new and its technology is advanced and somewhat unusual in the car world, the bar is higher for its performance. There is less room for error and potentially less forgiveness by consumers and Wall Street analysts.

The content of this blog is about crisis management and mismanagement in a digital age. It originates with Steve Bell, who spent 30 years as a journalist for the Associated Press and in four top editor positions at The Buffalo News. He is now Partner/Director of Public Affairs at Eric Mower + Associates, one of the nation’s largest independent advertising, integrated marketing and public relations agencies, with seven offices in the Northeast and Southeast. Learn more about EMA at http://www.mower.com. Steve’s blog is based on his own opinions and does not represent the views or positions of Eric Mower + Associates.

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About steveoncrisis

The content is about crisis management and mismanagement in a digital age. It comes from Steve Bell, who spent 30 years as a journalist for the Associated Press and as managing editor and editorial page editor at The Buffalo News. He is now Partner/Director of Public Affairs at Eric Mower and Associates, one of the nation's largest independent advertising, integrated marketing and public relations agency with six offices in the Northeast and Southeast.
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