If you're at all into cars and have an Internet connection, you've seen the news about a Tesla Model S catching fire after hitting a metal object in the road the other day. Tesla Motors' [NSDQ:TSLA] stock prices have fallen sharply, with many crediting that fall as a result of the fire. People are freaking out.
It needs to stop--at least for now.
What Actually Happened
A Tesla Model S hit a (presumably rather large) metal object in the roadway, destroying the front end of the car and rupturing the battery pack. The battery pack then caught fire. People took photos and video of it.
Then the web-sensationalism began.
A Thought Experiment
Hypothetical: A 2014 Chevy Malibu hits a (presumably rather large) metal object in the roadway, destroying the front end of the car and rupturing the gas tank. The gas tank then catches fire. People take photos and video of it.
Normal day at the office.
See the problem here? Cars catch fire when they crash, sometimes. The Tesla Model S is a car. So what's the big deal?
It has a scary, voodoo-magic, hey-I-read-about-laptops-bursting-into-flame battery pack instead of a gas tank.
The mental significance of that difference? Huge. The real significance of that difference? Absolutely zero.
Energy Storage = Volatility
Simply put, there's no way to store large amounts of energy in a car (be it electro-chemical or hydrocarbon-based) without having a whole lot of energy in a very small space. When things outside of normal operating parameters occur, that energy can escape--sometimes in violent ways.
If the Model S ran on compressed air, it could depressurize explosively. If it ran on natural gas, same story, with the bonus of ignition and flames. If it ran on distilled unicorn tears, well, it might get out OK. But this is the real world.
So everyone, please, take a step back, take a breath, whatever you need to do to pull back from this tizzy you're in, and consider that what we're all talking so excitedly about is just a car that got in a crash and then caught fire.
It happens every day.
In fact, it happens to over 150,000 cars every year.
Tesla's stock price has dropped in the past few days, and it's largely credited to the reports of the Model S fire (though a ratings downgrade on Tesla stock the day before may be at least as responsible). But consider, for a moment, that Tesla--a carmaker with just one car for sale, and a very expensive one at that--is still valued at roughly half the value of General Motors, and one-third that of Ford Motor Company.
GM and Ford have brands stretching back the better part of a century, long and storied histories, and full-line vehicle manufacturing operations. They're global, employing tens of thousands of people. They're certainly not just-past-startup-phase Silicon Valley tech companies that incidentally build a car.
So the rationalization in Tesla's stock price might be a good thing--and might more accurately reflect reality. Rather than the do-no-wrong, Apple-mystique approach the media and markets have taken toward Tesla thus far, this could be a recognition that the company will face the same challenges and responsibilities as a real car manufacturer does.
What does all of this mean? Take the Model S fire story as a data point. Continue life as usual. Understand that building a car company, and building cars, is about more than the latest 30-second news blurb on your favorite cable channel. Look at the company's product portfolio, its future plans, and its ability to meet its goals.
Then re-consider re-sharing the 42nd re-hash of a sensationalized car fire because it looks cool.