Tesla stock tumbles after Model S catches fire | Hacker News Reader

Tesla stock tumbles after Model S catches fire

news.yahoo.com

126 pointsrglovejoy193 comments

It's been confirmed that this was actually a fire in the battery pack (one of the 16 cells of the pack). However, the fire did not start spontaneously - it was caused by the driver hitting a large piece of metal debris in the road. The fire was also contained to part of the battery pack and did not cause a runaway reaction like in some laptop battery fires. The driver was alerted by the computer system and could stop the vehicle in a controlled manner, and evacuate. There was no explosion, and the fire did not spread to the interior of the vehicle. The fire department was able to put out the fire with a single truck.

All in all, I think this is actually a positive mark on the engineering of the Tesla Model S. Statistically, there have been fewer fatalities with Model S than the average for the number of miles driven - this is in line with the car's crash test ratings. This is also the first fire after the 12 crashes which have been recorded. A fire like this was inevitable; gasoline cars also occasionally catch fire when they crash. The energy content of a full gas tank is also a lot higher.

However, investors are very fickle when it comes to Li-ion battery pack fires. Even if this is evidence that the Model S is probably safer with regards to fires than a traditional gasoline car, naywayers will jump on it. Not a fun day to be a Tesla shareholder :P

Yes, Li-ion batteries can be like little bombs. Considering the batter was engulfed in a flame and safely contained...I'm pretty surprised and have a more positive view of Tesla now.

Indeed. SpaceX isn't public, or I would've bought their stock after seeing how their vehicle handled the aborted launch during their first ISS resupply mission. These guys understand the meaning of "fail safe."

Moreover, when this sort of thing happens to a car that uses gasoline, the results can be far more catastrophic.

"The freak accident occurred about 10:30 a.m. on Nov. 8, 1994, when the family was traveling to Wisconsin to celebrate birthdays. The van, driven by Scott Willis and carrying his wife and six of their nine children, struck a piece of debris that had fallen off a truck driven by Ricardo Guzman. The debris, a mudflap/taillight assembly, punctured the mini-van's gas tank, and the car burst into flames.

Scott and Janet Willis managed to untangle themselves and escape, but the children were trapped and five of the six perished instantly. The oldest in the car, 12-year-old Ben, died the next day."

http://articles.chicagotribune.com/2000-05-01/news/000501016...

This is possible with a gas car, but the gas tank doesn't occupy the whole bottom of the car and even if it is punctured, it won't ignite unless there is some additional spark or heat source.

Given the number of gas cars on the road, anything described as a "freak accident" must have a very low probability. If this is the 13th serious accident of a Tesla, it's unlikely that the probability is very low.

>If this is the 13th serious accident of a Tesla, it's unlikely that the probability is very low.

I'm not sure you've followed the thread here...I don't think anyone's (accurately) saying that this is the 13th spontaneous battery accident. I'm pretty sure the other 12 are standard traffic accidents, of which this is the first to produce a battery fire. All in all, it seems a rather small sample size to make any kind of determination.

Assuming that the normal rate of battery fires after collisions is one per million, the probability of observing such a fire after only 13 collisions is rather low. (Not impossible, just unlikely.) so perhaps the rate is not one per million. Doesn't mean it's one in thirteen, just not one in a million.

If the chance of a catastrophic event happening is one-in-a-million, then it is equally likely to happen on the 13th and on the millionth coin toss.

> Assuming that the normal rate of battery fires after collisions is one per million, the probability of observing such a fire after only 13 collisions is rather low.

What you're arguing is that the probability of it happening on or before the 13th time is less than it happening on or before the millionth time -- Which is self-evidently true of _any_ probability, and is a much weaker argument.

> perhaps the rate is not one per million

This is much closer to the argument you should be making. I.e. "Given that a purported one-in-a-million event occurred after only the 13th test, what is the probability that their estimate of one-in-a-million is accurate?"

(I don't know the math to answer that question, but I hope somebody that does will come along and chime in.)

Time for some fun with binomial probabilities!

Assuming I interpret the actual problem at hand correctly, this is how we formulate it statistically.

We have an event that occurs with probability p = 1/1000000, given an accident (of which there were 13).

The probability of having zero catastrophic events, given that we have observed 13 accidents, is (1-p)^13 = .99987

(For some real hair-raising fun, try this calculation with the success/failure rate of a typical condom.)

Note that this is a purely frequentist interpretation and ignores any Bayesian inference (ie, we assigning a weight of 0 to our Bayesian prior, which is atypical). It's not a very robust way of modeling the situation, for a number of reasons.

I think the right test to apply is the Wilson test.

http://what-if.xkcd.com/65/

Given this XKCD article, I would suggest the probability of a battery fire after an accident is around 1 in 26.

That estimate is a little bold: we can reject the hypothesis that the probability is smaller than 1/260 with p-value 0.05 (good confidence), but with your threshold of 1/26 the p-value becomes poor.

Note that due to the lack of selection bias (battery fire was already among the top security concerns before the accident), we don't actually need a very stringent p-value, so we can be fairly confident that the probability is greater than 1/260.

But my point was that even with probability 1/260, it's likely to be much higher than for gas cars, or you wouldn't have to dig up 20-year-old articles about "freak accidents".

> But my point was that even with probability 1/260, it's likely to be much higher than for gas cars, or you wouldn't have to dig up 20-year-old articles about "freak accidents".

Gas cars have electrical fires all the time. We don't read about it because it's not news.

Admittedly, those cars tend to be poorly maintained, and not nearly new high end expensive vehicles.

Even new cars are not exempt. Electrical fires are often a total loss even if the car looks ok otherwise because of the way the wiring looms are embedded in the chassis.

If 1/13 car crashes resulted in the car bursting into flames, that car would be recalled.

What is the threshold for a recall?

I'm not sure you've followed the thread. The previous poster claimed the sample size is sufficient:

> Statistically, there have been fewer fatalities with Model S than the average for the number of miles driven

Which of course it's not. But the general tone here of "move along nothing to see here" is transparently wishful thinking.

Of course a battery fire after hitting some road debris after only a dozen accidents is something to be concerned about. Maybe we don't know just how much yet but no one should be dismissing it offhandedly.

> Given the number of gas cars on the road

On the other hand, gas power cars have been on the road for a century now, manufacturers have had time to improve safety based, on accidents. Electric car manufacturer can improve from what is right now an excellent record (no explosion).

Let's also not forget that there are more than just Tesla cars out there with the bottom full of batteries: Toyota, Honda and GMC hybrid cars are in the same situation, so the sample isn't as small as you make it sound.

It's worth remembering that airplanes are only the safest way to travel because they put black boxes in the backs of planes to figure out why they were crashing constantly.

Trillions of miles later, we freak out if a plane's landing gear fails and the plane has to skid to an otherwise uneventful landing.

And the fact that pilots spend a lot mote time in training than drivers, and the fact that there are two pilots, and Air Traffic Controllers, and computers constantly checking the pilots input as well as the flight conditions, and ...

That helps prevent pilot errors. It doesn't help identify mechanical/software failures after the plane is in billions of tiny pieces.

Also, plains undergo near-constant diagnostics and preventative maintenance work.

Don't most new cars carry some kind of data recorder? If a failure is due to pilot error or lack of maintenance, we can at least use the data pulled from the melted, twisted wreck to rule out design flaws.

They do, but its built into the airbag system, and only commits the last 15-30 seconds of vehicle data when the airbag is triggered.

Tesla and GM vehicles have more sophisticated telematics than other car makers, and I'm sure Tesla is taking advantage of the data (battery pack performance, etc). You'll also get a call if your battery charge drops to a level that will damage your battery.

Yeah, gasoline is actually surprisingly difficult to accidentally ignite, wheras lithium ion and lithium polymer batteries self-ignite if punctured.

Diesel fuel is even more difficult (drop a lit match into a bucket of diesel and it will likely just go out.) For some reason most people don't choose their vehicle by the safety of the fuel source -- which isn't to say that people won't avoid a Tesla based on news like this.

You completely missed the point. How many people died when the tesla caught fire? This is a prime example of the tesla being safer, and people are using it to pretend it is less safe.

I'm not saying the Tesla is less safe: I'm saying that, contrary to what the parent post implied in his wording, it's almost certainly more likely for the battery to catch fire than for a gas tank.

The parent post did not imply anything of the sort. It was explicitly and clearly comparing the severity of fires, not the frequency.

There are plenty of things to catch on fire in a normal car. I've only own 3 cars and I've been in 4 car fires. (no one was hurt in any of them.) None of them involved the gas tank.

On this note I, during high school, worked at a large multiplex movie theater for about a year. During my shifts we had three car fires break out in parked, unoccupied cars. This was considered totally normal by both my employers and the fire department.

This stuff is clearly happening all the time.

This. A coworker's engine burst into flame for no apparent reason as he was commuting to work a few years back. Nobody died, but the car was a total loss.

I think this is relatively common, too. In my life I must have passed a dozen cars burning on the side of the road.

Gasoline car fires take seconds, not minutes and there are lots of places where things can go wrong, pretty much every junction of the gas line plumbing, the tank and the injection system.

Whereas Teslas are only vulnerable along the entire underside of the car. And don't require an ignition source.

Note that the fire was contained and that it did not enter the car interior.

Containing a gasoline fire after it has had a second or two to run is very hard if not impossible.

That's Tesla's PR spin. You'd probably be in pretty bad shape from the heat if you were trapped in that car. The guy taking the video remarked he could feel it just by driving by.

A key question here is how easy it is to start a fire from a relatively minor and common incident such as hitting road debris. Sure, it's possible in gas cars, and gas fires burn quickly.

But if it's a lot more common in cars with giant vulnerability zones along their entire undersides where shrapnel can start fires through physical damage without even an ignition source...

All I'm saying is this is definitely something we need to monitor closely, not just dismiss offhandedly or spin with clever PR like "the fire didn't enter the cabin (but still could have killed you)".

The battery pack is directly under the passenger seat, and this is typically a non-structural compnent, of very thin sheet metal. One would not want to be riding shotgun.

This is the 13th serious accident of a tesla, but I believe it's the first battery fire.

As the article notes, that is a rather infamous case that is a large part of the reason former Illinois governor George Ryan was convicted, as it uncovered a cash for passing grades on commercial driving tests scheme. It was a horrible tragedy.

Huh. I never knew that - thanks for pointing it out.

Equally interesting is that his successor [0] as governor was Rod Blagojevich, who also went to prison for corruption. That wikipedia article mentions that in the last 40+ years, 4 Illinois governors were charged, convicted, sentenced, and sent to prison for corruption or (in one case) fraud.

Quite a tradition they have there. Pat Quinn must be nervous.

----------

[0] http://en.wikipedia.org/wiki/George_Ryan

12 crashes is not a huge sample size. Also, potholes and other road hazards are so common that if 0.1% of encounters with them causes a fire that ruins the very expensive battery pack, it is an issue. Overall, yes, superior engineering prevented the problem from being worse than it was. However, there is still a problem.

IMHO, there is a major problem with Tesla's batteries. Boeing has had issues with its lithium-ion batteries catching on fire. I wouldn't be surprised if more Teslas have the same issues in the future.

> IMHO, there is a major problem with Tesla's batteries.

Is this based on any kind of information, or just supposition stemming from the problems Boeing had (where, IIRC, Tesla offered to provide engineering assistance).

Well, the Chevy Volts' lithium ion batteries also have fire issues too. Not to mention overheated laptops with li-ion batteries that have caught on fire.

We're still waiting on any categorical information from you, other than your baseless fears stemming from problems with wholly different companies using similar technology.

News, Every car has batteries that are potential fire/explosion/acid explosions.

I've seen a standard 12v lead acid battery evaporating/boiling hydrochloric acid out of its vent holes, I've also seen one smoking about to explode.

OK, add every laptop manufacturer, cellphone manufacturer, and any variety of portable device manufacturer on the planet to that list, then, as lithium ion or polymer batteries are flammable no matter what.

I assume you have a suggestion as to how this could be remedied? Or, actually, looking at your comment history, I see you are also a climate change denialist.

So, which oil giant do you work for, for whom you are spreading FUD?

Yes, please accuse anyone who disagrees with you as being a paid shill. Saying that the IPCC has lowered estimates, which it has admitted in its report, is now climate change skepticism? Really?

http://www.mercurynews.com/business/ci_24229744/tesla-says-c...

"But lithium-ion batteries have raised concerns in other vehicles. Two years ago, battery fires broke out in three Chevrolet Volt plug-in hybrid cars after crash-testing."

"Two years ago, battery fires broke out in three Chevrolet Volt plug-in hybrid cars after crash-testing."

"After" being the operative word. They crashed the Volts for testing purposes and then left them sitting outside with a nearly full but damaged battery. THREE WEEKS LATER a fire started.

When testing gasoline powered cars it is standard procedure to empty the tank immediately after crashing it, if they had drained or removed the Volts' batteries in a similar fashion nothing would have happened.

https://publichd.se/index.php?page=torrents&search=&active=0...

> ""After" being the operative word. They crashed the Volts for testing purposes and then left them sitting outside with a nearly full but damaged battery. THREE WEEKS LATER a fire started."

Well damn, those sound like verified deathtraps!

Seriously, the fact that she had to reach back two years probably says enough. On the general note of battery safety in crashes, there have been several Tesla Roadster crashes (to be expected with that style of car) (http://www.wreckedexotics.com/tesla/), how many of them resulted in dangerous battery fires? Clearly these batteries do not present a serious safety concern.

I hate the "you are a shill" retorts too, but damn if your response doesn't make it look like they are correct in this case.

> "But lithium-ion batteries have raised concerns in other vehicles. Two years ago, battery fires broke out in three Chevrolet Volt plug-in hybrid cars after crash-testing."

Imagine that, structurally compromised systems not disposed of properly are dangerous. That says more about GM than it does the technology.

When I have batteries take damage (falls, shorts, the ever popular screwdriver through them) they are disposed of properly immediately. I also only use proper chargers and don't over charge my batteries. Guess what? I've never had a fire caused by the battery (I've had people plug in components in reverse and blow up the diodes a couple times). I've been working with various battery technologies on a near daily basis for the last 14 years without incident.

Disclaimers: I'm a robotics/electric vehicle enthusiast. I don't do this stuff as my day job any more. I formerly worked in a university research lab building H2 powered race cars.

So, which oil giant do you work for, for whom you are spreading FUD?

First of all, I absolutely agree with what you have to say about the danger of batteries as an energy storage source. Spot on. Good work.

But please, please, please, let's not throw around "paid shill" accusations here. Even if it may be true, it degrades the discourse of conversation for the entire community. Your comment's point was perfectly valid without that.

Sally888 is a transparent concern troll. It's disappointing to see HN fall for it so easily.

I agree that we shouldn't be throwing around "paid shill" accusations. Downvoting is better.

Your humble opinions appear to be (a) anti L-Ion battery and (b) climate change skepticism. Is this a fair summary?

What a blatant ad hominem and straw man attack. Do you like to misrepresent someone's positions because they have differing opinions from yours?

So these are not your opinions?

You said "IMHO ..." and then asserted something with no evidence. So the only germane information is the quality of your opinions. I made no assessment of those opinions, I simply listed what I found, based on your posts, and asked for confirmation. If merely listing these things constitutes an ad hominem attack, then it says more about your opinions than it does about me.

Let's be fair here.

"You said "IMHO ..." and then asserted something with no evidence."

Why would you expect something else when someone starts their post with IMHO?

> If merely listing these things constitutes an ad hominem attack, then it says more about your opinions than it does about me.

Your post had an obvious tone to it.

Tone, obvious or otherwise, does not constitute ad hominem either.

If your answer to the question was "no", you should say "no" and then clarify. It's not that hard.

I neither like misrepresenting other people's positions nor am I prone to doing it despite not liking it.

Have I misrepresented your positions?

If your answer was "no" then why not say that?

...not sure if you've mistaken me for someone else. I have no part in this discussion except making the procedural point.

Whoops. Sorry about that.

My point (addressed incorrectly) stands. It makes less sense for me to answer "no" than for the person I was responding to to answer "no". If I was making a "straw man" then in what way was it straw? If I was misrepresenting his/her opinions, how so? Otherwise, if more-or-less accurately summarizing a person's positions is ad hominem then what does that say of those positions?

Elon Musk mentioned the battery problems that Boeing had / has, and offered to work with them to solve the problem that they had solved themselves..

Yes, but it seems that that may have the same issues themselves. Li-ion batteries are notorious for catching on fire. Yes, the sample size is too small to make a determination on Tesla but I suspect they may run into the same issues as Boeing as they sell more cars.

This is why people call you 'shill'. You aren't disagreeing, just using leading speculation. These are specifically not the same issues as Boeing, whose design Musk criticised for ability to produce 'domino effect' fires that get out of control very fast. That did not happen here.

Casting aspersions like 'li-ion are notorious' also stinks, much like the smell of gasoline before it (notoriously) explodes.

Ignoring the facts of the particular case whilst hugely generalising about the technology isn't a good foundation of debate.

What are your qualifications with regards to battery chemistry and energy management system engineering? I ask only because you said this is your opinion.

The sample isn't 12 crashes. It is the 12 cars that crashed plus all the other cars that didn't.

That's... not true. The question is "how likely is there to be an electrical fire in the Tesla, given that it has crashed (or is crashing)" not "how likely is there to be an electrical fire".

It's easy enough for things not to catch flame when they're being used properly; the real test is how things behave when other things are going wrong.

That's not to say that this means all Tesla cars are fiery death-traps of doom. Just that the sample size really is the number of crashed cars.

Following your logic, we can ignore Tesla cars that catch fire without crashing, because we can assume they're not going to catch flame when they're used properly; We can assume cars that don't crash aren't going to catch fire anyway, so, even if they may happen, let's throw that data away, because we know our assumption holds true.

That's ridiculous.

That is besides the point. We are talking about what happens when your Tesla S does crash. There is on "if" in the certainty that Teslas will be involved in accidents. The questions are "will they catch fire when they crash?" and also "how bad will that fire be for persons and property involved?"

There's also "Under what conditions when Tesla cars crash will they catch fire", and then you only look at your 12 crashes, and that's when everything goes wrong.

    The Space Shuttle Challenger exploded shortly after take-off in January 
    1986. Subsequent investigation determined that the cause was failure of 
    the O-ring seals used to isolate the fuel supply from burning gases.....

    NASA staff had analysed the data on the relation between ambient 
    temperature and number of O-ring failures (out of 6), but they had 
    excluded observations where no O-rings failed, believing that they were 
    uninformative. Unfortunately, those observations had occurred when the 
    launch temperature was relatively warm (65-80 degF).

http://www.datavis.ca/gallery/missed.php

Let's look at this question "how bad will that fire be for persons and property involved?"

You look at your 12 crashes where fire occurs, so (e.g.) 6 crashes. Of 6 crashes 3 were accompanied with injuries. All 3 crashes that were accompanied by electrical fires and injuries occurred was when the car's speed was between (e.g.) 40mph and 50mph. Does that mean when the speed is not between 40mph and 50mph, people won't be injured when there's a crash and a fire? It means nothing like that but it's too easy to make a wrong conclusion; you're skipping all the other data where injuries and/or fires happen independently of crashes.

Sure, you can look at all the crashes, but you'll still run into exactly the same problems with insufficient sample size because now you're dealing with a rare event, which means the required sample size balloons massively.

in movies cars catch fire and explode all the time. guess, the movie industry will face an inevitable change when 20-50 years into the future everyone drives electric.

Anytime energy is stored to be released there is a chance of disaster. Usually this manifests itself in fire.

I'm kind of fascinated by the idea that the car is telling you to stop and get the hell out before doom happens.

Does anyone have an image or video of that kind of notice?

I used to have a K car that would tell me things like "Your door is ajar" and other random bits of information.

Then one day, it said, "Your electrical system is malfunctioning." We all bust out laughing. If was funny until the engine stalled after 4 more miles.

Turned out the alternator was dead.

"My fault-detection circuitry may be malfunctioning, but I'm not sure how to tell"

>The fire department was able to put out the fire with a single truck.

Goodness I hope so... A modern fire engine can pump a couple thousand gallons of water and foam every minute...

A modern fire engine pumps around 1250-2000gpm.

However it also only has around 750-1000 gallons of water onboard. So you'd better hope that there's a hydrant nearby.

Also, hand lines are only 150-250gpm. A deck gun is pretty useless for a car fire (a - can't be aimed at below 0deg, and b - you'd have approximately 30 seconds of usable time to get any deluge on the car and extinguish it, which is not particularly realistic if it's at all involved).

You just need to get creative. Assuming you had a hydrant, you could just hook up a couple portable monitors, or maybe the engine has a tele-squirt. (I kid, obviously...)

Obviously there are limiting factors beyond the flow rate of the pump. My point was simply that a car fire that exceeds the firefighting capabilities of a single engine would be a very impressive car fire indeed.

True. The last car fire I put out with two dry chem extinguishers from our rig (which is good, because our rig was an ambulance…)

But yeah, maybe a ground monitor would work. :)

who in the world can tell the material of the thing you just run over on the highway?

That said, I've seen more Lamborghini and lotuses on the highway bursting in flames than model S's (Ss? Ses?)

And

> Statistically, there have been fewer fatalities with Model S than the average for the number of miles driven

Biggest fallacy ever read here. Most car accidents happens when people are traveling large distances or coming back from unusual places such as parties and bars (not home-work commute) and the Tesla and other low range electrical nowadays are mostly commute machines. (yeah they can be used for those things, but 99% of the people that actually buys them do not)

> Most car accidents happens when people are traveling large distances or coming back from unusual places such as parties and bars (not home-work commute)

Source please? I've always heard that the majority of accidents happen within the first few miles of a drive, but have not put in any research.

That's only because most trips are of a few miles.

What is the source for " Most car accidents happens when people are traveling large distances or coming back from unusual places such as parties and bars (not home-work commute)" when most of the data I've seen says that most accidents occur within 5 miles from home and that only 1% of accidents occur further than 50 miles from home.

It is, however, a fun day to become a Tesla shareholder.

Does anyone know if it's possible for a foreigner with a US bank account to buy/manage stock there? Preferably online.

You need a brokerage account with access to the US stock market. There are a few that allow foreigners.

I believe Charles Schwab provides global investment solutions that allow you to purchase US stock.

Yes. Check out Interactive Brokers

Yes, most US brokerages will accept foreigners. There's just a couple of things to pay attention to.

- Make sure you know the tax arrangements between your country and the US, and file whatever documentation is needed. In the US, you'll probably want/need to file a form W-8BEN with the IRS (http://www.irs.gov/uac/Form-W-8BEN,-Certificate-of-Foreign-S...) to prevent withholding taxes in the US. Most brokerages will be used to that anyway.

- Documentation of your identity. If you have a US bank account already, this will likely be trivial for you. But sometimes US financial institutions gets finicky about this. I had a US bank account with Chase years ago as I had a small business where I had to process a reasonable number of US cheques, and processing them with a non-US bank would effectively eat everything in fees.

I ended up having to go to the US embassy to get an apostille attached to copies of my passport and the application form (basically someone had to watch me sign the documents, and match them to my ID and then attach a document and seal as evidence that they had certified my signatures). Other times they don't care at all - it appears to be down to who has been subjected to cranky auditors and/or concerns about money laundering recently or not...

Thanks for that, it sounds like there's potential for getting in a bit of a hassle. Hopefully it will be fine, thanks again.

Why not simply use an online broker in your own country? I assume any online broker will allow you to buy stock on Nasdaq, where Tesla is traded. (I'm in Europe and just bought some Tesla stock through an online trader)

Oh. That might be simpler, I didn't know they could do that. I'm not very familiar with the stock exchange, thanks.

> Not a fun day to be a Tesla shareholder

Only if you're fickle and lack conviction. People are talking a lot about "is Tesla at a fair valuation" and I personally believe that it's impossible to know what a fair valuation is until a few more years have elapsed.

I could reasonably see Tesla bouncing back to $300/share over the next 18 months or staying at or around $200. The current drops are more likely related to general market unease and opportunism rather than anything endemically wrong with Tesla. Also, with "momentum" stocks I'm sure some people got in looking to make a quick buck and also some people are surely taking advantage of the general shutdown-related cacophony to short the stock so they can buy it at lower prices (I would).

Fluctuations like this illustrate why one of the most important qualities an investor can have is patience. If you're trying to get rick quick, you'll be in trouble. But if you invest in solid companies that you understand, you should do well. Provided you do your homework, of course.

I'll reiterate Peter Lynch's excellent advice from "One Up on Wall Street" - if the stock drops but the fundamentals still make sense, stick around to see how the story develops.

You talk about fundamental value and then throw out a $200-300 share price. What valuation methodology could possibly come up with that absurd number?

The correct stock market value of a company is the discounted sum of all its future earnings. This number is impossible to calculate, but investors can estimate it with probabilistic models (a discounted cash flow model, taking into account the probabilities of different scenarios).

E.g. a simplification of such a model would be to create some plausible-looking probability histogram for the "fundamental" value of the company in 10 years. Many investors believe there is a significant probability that Tesla will be worth >100 billion in 10-15 years, i.e. one of the world's major automakers (perhaps one of the largest) due to a global shift to electric vehicles and its 5-year head start and patent moat. It's probably worth noting that multiple major analysts have performed such a DCF analysis and arrived at a number in this ballpark.

Under these assumptions, a $200-300 share price isn't absurd. I can agree it's speculative and extrapolating a lot. But on the other hand a $40 price as some analysts are calling for, is IMHO more absurd since it ignores some very likely growth prospects. If companies were always valued on "fundamental" value, buying growth stocks would be guaranteed to make you a massive, market-beating return.

Can you pointed me to one of these "major analysts" who has come up with $200-300 fundamental value along with a detailed explanation of how they came to that number?

Short answer, no. I don't have access to the actual reports since they are reserved for paying customers, but prominently Deutsche Bank ($200), Northland Capital Markets ($230) and Global Equities ($225) all have price targets considerably higher than the current market price. All of these companies stake their reputation on being right, as most professional analysts do.

http://www.streetinsider.com/rating_history.php?q=TSLA

If you have access to analyst reports, the one from Deutsche Bank is probably the one to look at. The best source I can find is this video from August before the recent PT upgrade, but there was an interview somewhere where Dan Galves goes into more detail about the DCF model they are using.

http://www.cnbc.com/id/100946446

http://www.streetinsider.com/Analyst+Comments/Tesla+Motors+%...

Main point being, there are people with a solid economics background who disagree with your claim of absurdity. You're of course welcome to put your money where your mouth is and short; Tesla was for reference the most-shorted stock on the NASDAQ at $30/share.

Price is not the same thing as value and analysts are usually wrong (search for the studies). The important thing in a valuation are the assumptions: You can come up with any number you like, the reader has to decide whether they agree with how you got there.

Here is a justified valuation of $67. Tell me what assumptions are wrong how how that would yield a value of >$200.

http://aswathdamodaran.blogspot.ca/2013/09/valuation-of-week...

This analysis underestimates the probability of higher sales and margins in Tesla's future. Specifically the point where growth will slow down to "auto industry averages". Up this number and the expected net margin a bit, extend the discounted analysis a bit beyond 10 years and use a slightly lower discount rate, and you'll end up with a number higher than $200. This is all guesswork based on unknown parameters; all we can do is assign some probabilistic assumptions.

Furthermore, direct comparison with the established auto industry is dangerous, since we are likely to be in the beginning of a large-scale transition to electric vehicles. The established auto industry will have trouble with this transition due to vested interest in internal combustion vehicles. Tesla has already demonstrated that it can tackle innovation on a level the established industry is unable to (cutting out the dealerships, fully utilizing the advantages of electric drivetrain, software-like configuration of cars including battery swap), so from my perspective it seems exceedingly likely that it will at the very least grow into a major automaker. But the upside from this point is discounted by analyses such as the one you linked.

That said, I don't really care whether you agree with this. You're certainly welcome to take the other side of the bet; I have my money where my mouth is. Would you be willing to take a short position in this stock?

Obviously if you just put in more favorable input parameters you will increase the share price. The entire point of the exercise is to justify your choices: What input parameters exactly give you a >$200 valuation and why do you think they are reasonable? He's already putting margins at top 5% of auto industry. As for discount value he wrote "the value per share that I obtain is not very sensitive to the [cost of capital]": Are you arguing with some other factor that contributes to the discount rate? How common is it for growth to persist over 10 years in the auto or industrials sector?

> The established auto industry will have trouble with this transition due to vested interest in internal combustion vehicles.

Ford is already shipping an electric Focus. GM has stated they are working on one that will compete with Tesla's $30000 model.

> so from my perspective it seems exceedingly likely that it will at the very least grow into a major automaker. But the upside from this point is discounted by analyses such as the one you linked.

No, it assumes it grows into a major automaker with revenues comparable to Audi and has margins in the top 5% of the industry.

I've presented my case as clearly as I could without writing a whole blog post. You are obviously certain that you are right and that I am wrong by a factor of 3.

I invite you to take a short position and put your money where your mouth is. It's a bit annoying to argue with someone who apparently doesn't believe enough in their case to act on it.

I'm not certain the $68 valuation is right, the opposite in fact. That's why I was looking for a compelling argument for a $200-300 valuation for which I have found no defensible justification from you or anyone else.

Again, valuation is not the same as price and we are not talking about price. Tesla's stock price is not being driven primarily by fundamental value. From the same author: " Once you accept the pricing proposition that the market price is what it is, the key to winning at the pricing game becomes forecasting changes in price rather than assessing whether the current price is right. As a consequence, your focus on news stories will become incremental and each news story will be assessed in terms of how it will change the price, rather than how it will affect overall value."

I don't trade individual securities, I wouldn't trade a "hot" stock based on valuation since the price is then driven by other factors and I certainly would be reluctant to short any stock because shorting is a complicated trade: Shorting is a short term play, you need to know when to short or else you will be crushed by fees. You can also be bitten by things like squeezes and acquisitions and the fact that shorting without protection is unlimited liability. Shorting is far more dangerous than going long and even sophisticated professional money managers get burned, even when the stock is actually overpriced. QE-infinity makes shorting even more perilous.

What is annoying is that you pretend you did a valuation before investing in Tesla and traded based on the valuation. Now you rationalize the trade to yourself by interpreting information in a way that suits the outcome, post hoc ergo proper hoc.

You might make money but it won't be because of any justifiable insight you had.

Well, I'm sorry that I annoyed you ;)

If you do find a way to do a proper DCF with mostly-known variables on a growth company likely facing an industry-wide paradigm shift, make sure you capitalize on it by making an exception to your rule of not trading individual securities :P

No one has claimed that this is a science, and this includes the hardcore value investors who often miss risks which the market had in fact priced in.

The fire has little to do with it. The stock is down because earlier this week it was priced at 100x Tesla's earning estimates for next year, and implies a 30x growth in sales by 2020.

Simply put, while Tesla's fundamentals are strong, there's a bubble in the stock. Retail investors (e.g. us) have been excitedly buying it without taking a careful look at the stock, and several institutional investors have decided it's a good time to sell and reap the rewards (i.e. fleece the excitable retail investors).

Here's a CNN Money article about Bank of America's sudden bearward turn on Tesla: http://money.cnn.com/2013/10/01/investing/tesla-investors/in...

The Baird Capital report is a little more nuanced; it boils down to "Tesla have been kicking ass, and that's already priced into stock, so don't buy it now because everyone else is buying it": http://www.forbes.com/sites/chuckjones/2013/10/02/tesla-down...

Anyway, yes, this isn't anything wrong with Tesla, it's just a natural market correction.

When a stock is out of whack with its fundamentals, bad news is disproportionately likely to hurt, so it probably has a good deal to do with the fire.

To quote Ian Wright (co-founder of Tesla) "There have been five laptop fires so far, and it's front-page news. There are 750 gas-car fires each day, but that's not news."

Here's a picture of a SUV on the top of a Tesla Roadster, and it didn't begin to burn

http://www.flickr.com/photos/16822508@N05/3995784846/sizes/l...

I'd love to know the story behind that. It looks like the SUV hit head-on due to the positioning of the SUV and the damage to the front-end, but the rear-end is also significantly damaged. Did the driver get rear-ended as well, with the other car out of frame?

The SUV looks showroom ready. That looks like an ad for SUVs.

You don't want the vehicle to look show room ready. You want the people inside the vehicle to be unharmed. The best way to achieve that is for the vehicle to absorb the forces of the impact. Thus making it not look showroom ready.

not necessarily. its fine if the other car absorbed all of the implact during its displacement, for example. also, if the other car crupmled to mush, doing the same. it is not fine for the safety of others on the road, however.

Following the link back to the photo page, there are some details there. The Tesla was behind the Touareg when a Prius ran into the back of it.

https://secure.flickr.com/photos/16822508@N05/3995784846/

I'm sorry but this is a horrible quote/statement. Is gasoline dangerous yes. But to compare laptops to vehicles as if assuming they go through even remotely the same conditions is misleading and just plain wrong.

Will there be skewed coverage between tesla vehicles and their combustion brethren yes there will, this can not be helped. We have been around internal combustion engine vehicles for over a century now, ppl are used to there advantages and disadvantages.

Teslas are very new on the other hand, ppl are afraid of change. While this may not be 100% justified, we should still give new applications of technology like the tesla more scrutiny. Its part of the progression progress.

Now just figure out the ratio of gas-cars to Teslas on the road, and we can decide if that is meaningful.

This sort of thing happens all the time with high-end cars without any external factors like hitting debris.

Lamborghini - http://editorial.autos.msn.com/blogs/autosblogpost.aspx?post...

Ferrari - http://www.autoblog.com/2010/09/01/ferrari-458-italia-recall...

Well, there's bound to be issues in what's essentially the full 1.0 model of Tesla's car product (let's be honest, the Roadster was an extended beta).

I live in an area that manifests overall economics in the form of cars (there's a Maserati, Ferrari and Porsche dealer all within 10-15 minutes of my house . When the housing bubble was booming, ~$100,000 cars were everywhere. I remember seeing so many Porsche products on the road I thought that there must be a North American Porsche factory nearby -- I would literally see at least one at every stoplight

When the economy took a downturn, all those cars disappeared and were replaced by more "practical" cars. For the last 2 or 3 years I might see a Porsche once a week.

All of a sudden, in the past year things are starting to return to the old ways, except instead of Porsche products I see Teslas everywhere. I was expecting Teslas to be like the odd Lamborghini I see once a month or so. But no, I see at least one every day of the week, and I work at home. They seem to have hit the magic combination of great product and a growing economy - which is what's needed when you enter the market with luxury vehicles and work down.

I'm absolutely not concerned about the current future of Tesla, their cars are selling like hotcakes right now, and I bet the Model X will sell like wildfire with the stay at home coffee shop visiting yoga pants wearing stylish soccer mom demographic that seems to make up 90% of my neighborhood. I fully expect to see at least one Model X on every block in my neighborhood...after all, when times were booming, there was a Cayenne on every block.

Don't talk about my wife like that

I knew something like this would happen and send the stock tumbling. I bought in at ~18 and got out at ~150 with the intention to buy back in if it ever fell significantly. I assumed this would happen.

BTW, I am a huge fan or tesla and bought in originally because I believe in what they are doing, but the gains got too be too much to not lock in. I'd be buying back since I still believe that they are the future and the most forward looking car company at the moment. The big car companies are going to keep showing up at Tesla's door for access to their tech and know-how, and it's going to cost them.

The way to make money is to buy when blood is running in the streets. - The fourth Baron Rothschild.

This is news because it's the first time it's happened, to a new technology. Had I a brokerage account I would be buying.

This news was also combined with Baird downgrading (which probably has more to do with the drop). TSLA is a great stock and a good long term hold but if you're in the short-medium market it's probably overpriced.

I say all this of course as a smug fucker who bought at below $30 :)

I bought at about $40, about a week before they released numbers and suddenly ran up over $120. I really wish I had bought more, but I was actually just buying a few shares because I liked the company, I never expected to make any real money on it.

I didn't buy at $33, cause I thought the run was over.

Yeah. that one worked out well.

Not disagreeing with the point of your comment, but the quote is as unsourced as the famous "those who make the money make the laws" quote attributed to a different Rothschild.

Really?

http://en.wikipedia.org/wiki/Boeing_787_Dreamliner_battery_p...

It was at this price level a few weeks ago, and August had a similar hump of 134-153-136.

I wish that were true of my BP stock. I've been waiting 3 years for the price to recover after the Deepwater Horizon incident.

BP's a tremendously large company. I can only expect it will take a lot of time to recover.

"Shares of Tesla Motors Inc. fell $12.05 to $180.95 — the stock's biggest one-day decline since July 16."

Wow, the entire value of the last 14 days worth of growth was wiped out in a day. It's not a "tumble", it's a full-on bloodbath!

I own some TSLA stock and in my opinion it's a blip. The stock is heading north of 200 before the end of the year, it's just a matter of velocity. The historic velocity is so much faster then any other company that I expect corrections on a weekly basis. Stock trading is often emotional like a poker player that goes on-tilt. The savvy investor actually sees buying opportunities at moments like this.

Likewise. I'm long TSLA and staying that way.

I was thinking the same thing. I've never been walking down the aisle of a supermarket, seen a 5% off sale on something, and thought "wow, those prices are tumbling".

It's like here in Aus, for quite a few years house prices were increasing 20-30% each year. After it plateaued, a decrease of 1-2% is described in the media as 'free fall' or 'crashing' or any number of other fear-mongering descriptors.

Lots of day traders on TSLA. Nothing makes them jump ship faster than someone shouting 'fire!'.

To me, that sounds like a good time to buy.

Meanwhile, hundreds of gas-powered vehicles also catch fire when colliding, but nobody bats an eye... https://www.google.com/search?q=vehicle+catch+fire&num=100&e... Stock holders are so irrational.

While it's safe to say that Toyota or Ford could weather a safety scandal without massive long-term damage, the same isn't necessarily true with an upstart like Tesla.

Yes, Tesla is a car. Never heard of any other car companies losing such a massive amount market capital due to one accident...hell, even the passengers were safe AND the fire was contained to the battery bay. I've seen cars that burn to the ground despite the firewall.

If anything, I have a more positive look on Tesla's now than I did before.

Agreed. After reading the details I want one even more.

Ok I read it quickly, but it seems like the fire was in the Frunk and the batteries are under the cabin. That makes it seem like it's just a normal electrical fire - probably from something getting shorted after he drove over 'metal debris' - and not anything specific to the batteries. If that's correct this is unfortunate for Tesla as even gasoline cars (and certainly hybrids) can have an electrical fire after hitting something.

Either way it was bound to happen eventually.

noprocrsted out of my edit window, but I stand corrected: https://news.ycombinator.com/item?id=6488339

It would be really interesting to see what penetrated the battery, although it sounds like we probably won't. When determining the safety of a vehicle one of the things that is not looked at AFAIK by the NHTSA is how the vehicle deals with, for example, exhaust system debris coming up into the engine compartment, floor, fuel tank, etc.

At the risk of being overly contrarian: it's possible this debris would have done something much worse if a Honda Civic or something had hit it. There is not enough data to draw a conclusion on that, let alone make a statistical comparison between vehicles.

I've had two cars catch fire: 1974 Land Rover Series III, 2006 Fiat Doblo Active. The first was an electrical fire and the second was a diesel leak (diesel burns like fuck when it gets hot).

This isn't unique to Tesla! I'd rather drive a Tesla but they're too small for me and too expensive.

Please don't make me think my old landy is going to catch fire. I have nightmares about such things.

They do that. You just fix 'em. This was a short in the ignition system which caused the entire ignition wiring to burn out. Took out everything electrical nearby as well including lights. Fortunately I had a hand crank in the back so it got crank started (took ages but worked) and got it home just before it for dark. Took about 4 hours and £50 to fix it myself.

If that was a modern vehicle you'd be screwed so don't have nightmares - it'll probably still get you home with no electrics (if it's pre-defender :)

Keep tumbling, I'd like to buy it when it hits the low point because this is silly.

I'd drive a Model S any day if I could afford it.

That was my thought! As soon as I saw this headline, I started moving money around to make a purchase, but the stock is already recovering.

Give it another go, it's not quite recovered yet :P

I'm waiting for 170.

Wonder if Boeing will Reciprocate the offer to help them figure it out. If I were Boeing's PR person and felt a tad cheeky this morning I just might.

"Shares of Tesla Motors Inc. fell $12.05 to $180.95 — the stock's biggest one-day decline since July 16."

Wow, that's the biggest drop two and a half months. Truly the end is in sight for Tesla.

Accidents with new technology are reported disproportionately to accident with old technology. Probably a good opportunity for contrarian investors (although they may be a little burned from the 400% stock price increase this year...)

It will be interesting to watch the market react to this.

This is important not because of Tesla, but because the auto-drive car makers are going to have an even bigger hurdle deploying auto-drive. Yep, there will still be crashes, and it remains to be seen how the news media will run with these types of stories -- explaining the context, or piling on. My bet is that initially they'll explain the context, but just like everything else they cover, eventually they'll go for video of flaming orphans over telling the larger story of how much good is being done. Here's hoping I'm wrong.

All it takes is some bad press. People still joke about the Ford Pinto.

Yup, just some bad press and dozens to hundreds of people dying in fires after surviving the initial crash.

(I've seen estimates as high as 900 people killed in Pintos that way. That might not be accurate or fair, but that is part of the public perception that fuels the Pinto jokes decades later.)

Don't forget the "conciously choosingto let people burn to death rather than fix the fault because lawsuits are cheaper" bit of the story.

I went to a Tesla owners group meetup a few months back. It turned out that although they loved their new cars, every one of them had problems with their Model Ss that required a trip back to the dealer.

I know someone that owns a Model S. When he had a small issue the level of service was insane. They came to pick up his Model S and gave him a loaner. They had back to him in a day.

This is new technology but the problems are few and if there are problems they fix them in a heartbeat.

When you buy a piece of bleeding-edge technology, you're kind of signing up for a few problems that require attention. Goes with the territory. The real question is, once you identify a problem, how is the company doing at fixing it? If they're giving excellent service, you're going to have a high overall satisfaction level.

And may I just put this offer out there: if there are any millionaires who are unhappy with their (unburned) Model S, I will be glad to take it off their hands for just $99.99 plus shipping. (Who am I kidding? I'll cover the shipping myself.)

If this was about a crime and not a car, your attitude would be considered victim blaming.

I doubt the dealers are emphasizing that you are likely to have a problem with your expensive purchase.

Salesmen, who make their living by selling luxury items, don't emphasize the negative points of the thing they're selling? Color me surprised.

Call it victim blaming if you want. I call it being realistic about the premium you pay for being the first person on your block to have the shiniest toy. And for the record, I wasn't addressing the issue of the fire; I was addressing the comment about Tesla owners being generally happy with their purchase, despite having had a few things that required service. Not too many crime victims express the sentiment that, despite a few negative items, they are generally satisfied with the transaction.

Heh. Try going to a BMW owners group some time.

The truth of the matter is these are the tests electric cars will have to endure over a period of time in order to reach wide adoption. Despite what's been said here a full tank of gasoline is far safer than a fully charged battery pack with enough energy to go 300 miles. Before anyone mauls me, consider how many gasoline cars have been driven and, yes, crashed, world-wide since gasoline cars came into mass production. There have probably been millions of accidents without fires, even with fuel leaks. There's probably no imaginable way to compare the two at this time. We simply don't have enough data. And, no, linking to a horrible crash video on youtube involving gasoline igniting does absolutley nothing to support arguments on either side.

The one issue with electrics that is not spoken of is the fact that you have a several hundred volt high energy system that could very well electrocute passengers. I fully expect that to happen one day (in general, not necessarily Tesla). If and when that happens you can bet it will set the breaks on electrics for a while and relevant stocks will plummet.

I still believe electric cars are the future. We simply need to go though the evolutionary process that will make them really safe for hundreds of millions of electrics to share the road. What happens when you have a pile-up of ten or twenty electric cars on a fogg-covered highway? A pile of mangled wrecks with 400 Volt high energy systems is unimaginably dangerous. I can think of a few horrific scenarios under those conditions.

At some level part of me thinks that fuel cells are the future, not batteries. Having something relatively benign that can leak out would be a good thing.

Your argument doesn't make sense. This is a question of carrying a dense energy source with you at high speed. A pressurized tank of hydrogen has just as big potential for causing massive damange as a fuel tank or a battery. Probably more, since hydrogen will violently explode if ignited in the atmospohere.

Where did I even mention hydrogen?

Probably worth buying the shares now then... I mean if we consider the amount of combustion engines that caught on fire in history... You get my point.

Video: http://www.youtube.com/watch?v=q0kjI08n4fg

Looks like its front trunk is burning.

Guy recognized it's a Tesla ... that's probably more of a positive than not. That video wouldn't really show how slow the fire actually likely started.

Perspective: http://stockcharts.com/h-sc/ui?s=TSLA&p=D&yr=3&mn=0&dy=0&id=...

TSLA has been on a moonshot, it is "tumbling" all the way back to September prices.

Does the charge in the battery affect the flammability? For example would a completely discharged battery never catch fire?

And I thought SpaceX was the dangerous company here. Maybe Tesla will be the first of Elon Musk's companies causing a disastrous accident.

Innovation and quick iterations are great for R&D but come with a price when released on the market too soon. That's why I put my money on Orbital and the other dinosaurs instead.

You know what happened to dinosaurs, don't you ? Poof

Disappointing stock traders don't believe in innovations. Right time to buy stocks for rest of us.

It's all a big game, it's silly. Much like how Bitcoin currency will fluctuate - and much how it will be gamed by those who have the ability to influence large markets and opinion on things (whether from people not being educated, or reacting emotionally).

I don't think "tumbles" accurately describes "declines to the price it was two weeks ago", particularly since no one used the word "skyrockets" for the last two weeks' rise (it didn't), or some similarly exciting terminology.

It fell to its price from two weeks ago in less than a day. That's around 20x faster. So yeah, I would use more excited terminology.

It baffles me how somebody willing to buy TSLA would become scared so easily. I don't pretend to understand markets so could anyone explain how such behavior is possible?

Probably manual sell off, then automated computer run systems see the dip and sell off before major loss.

There was something earlier this year where a news agency's twitter account was hacked, and the hacker reported that there was an attack on the white house, and the stock markets went crazy for a bit.

http://www.usatoday.com/story/money/markets/2013/04/23/stock...

Edit: Also, the stock was downgraded.

You buy because you are expecting good news to be coming. Bad news comes instead. Your whole reason for being there is now gone because whatever good news comes isn't going to trump the bad news that is here now. You sell.

Or you buy because there is a crazy amount of hype on the stock and a history of insane growth. Your expectation is more of the same. That suddenly changes dramatically. You sell.

The stock has been traded mostly on pure momentum and speculation of late. That kind of scenario is highly sensitive to any kind of news.

I'm surprised the tumble wasn't worse than it was. There must be some real solid long term money in play.

It baffles me how somebody willing to buy TSLA would become scared so easily.

This isn't retail traders. It's institutional traders who understand that the value proposition of Tesla relies upon getting over the hump of "the new", which is a perilous position where any risks that differ from the old risks have a very negative impact on the proposition.

We know and accept that normal cars can catch on fire, and that gas tanks can be punctured and leak, etc. These are known quantities. Crazy exploding/catch on fire batteries though seems new and scary. It may be entirely irrational, but institutional investors understand the importance of psychology (this no-one-injured car fire is in being carried by the majority of news sources) so they just move the money to other investments.

You sell because you expect everyone else to do the same. Then you hope to rebuy at a lower price and make more money when the stock returns to pre-fire level.

No one owns Tesla stock for market value reasons. It's overpriced, but that doesn't mean you can't make money on the stock in the short term.

No one owns Tesla stock for market value reasons.

I own it because I honestly don't know where else to put the money I allocate towards tech stock purchases. AAPL has no room for further growth until we colonize the outer planets, and other recent success stories like YHOO seem even less sustainable.

Picking stocks of reasonably promising companies with incompetent competitors seems like a good strategy, hence TSLA.

12 Tesla crashes. 1 fire. The fire was contained, the driver was alerted, and the car was stopped safety and evacuated. If I had money I would buy Tesla stock. And a Tesla.

I am sure it is easier said than done, but it seems like the batteries simply need to be better protected. Something like a carbon fiber or titanium under shield.

Seems like a normal potential issue upon hitting debris.

Will be a lesson for Tesla, I hope they improve and make it more better. I will still go for Tesla

Best time to buy Tesla shares I guess with everybody panicking.

Fools and their money have an inordinate amount of influence.

Tesla stock should tumble because its grossly over valued.

Remember Buffet: Sell exuberance, buy fear.

arson?

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