Caution: Fragile

I was reading a story off on the AP by way of the Seattle paper about one of Tesla Motor’s cars catching on fire and burning into slag when one of the later paragraphs caught my eye and it occurred to me just how fragile a new business really is. There’s no indication yet that anything was wrong with the vehicle; the crash investigators on the scene said something about debris from a crash getting into the battery pack and starting a fire, but there’s no indication that the driver or the design had anything to do with it. Cars do, after all, crash sometimes, and gasoline-powered cars catch on fire and burn down to their chassis every day in America. No one was hurt in the incident, the car didn’t explode, there were no toxic spills mentioned or innocent bystanders placed in jeopardy. No, what makes the story so surprising is that Tesla’s stock price dropped by 6% almost immediately after the story broke…

You can pick up the story from the Seattle PI web page here if you want to, but the basic story is a fairly routine traffic incident. If the car involved had been any conventionally-powered model, or even one of the newer “clean diesel” or E85 “Flex Fuel” types, this wouldn’t have rated more than a few lines in the traffic news section on page 47 of the paper. But because the Tesla Motors products are so new, and so expensive, and so exotic – and because the company has gone to such lengths to tout its products as exceptionally safe and reliable – this story was everywhere in a matter of hours, and the investors who were already uneasy about a new and unconventional company in a troubled industry began to edge away toward the exits while trying to look innocent…

This is hardly the first time this sort of bias against an unorthodox company has appeared in the media, and it certainly won’t be the last. The reading public – online even more so than in the real world – loves some schadenfreude, and all of the people who didn’t pay $120,000 for a car, let alone one that has huge batteries made out of toxic chemicals we don’t know how to dispose of safely and apparently sometimes catches on fire, can get a warm feeling of being smarter than those rich, trendy, early-adopter types who have. What struck me as remarkable about this – and the reason I’m wasting your time calling it to your attention today – is that this isolated incident, which so far does not appear to involve anything wrong with the product or the company that produced it, has immediately resulted in people who should know better bailing out on the company…

Now, it’s possible that all of the investors in this story have other reasons for going sour on Tesla Motors, and this incident and its attendant bad publicity is just what pushed them past the tipping point. It’s also possible that the negative publicity really will lower public acceptance of the company’s products, or just lower sales, enough to damage their business prospects and make the company less attractive as a long-term investment. But none of that changes the fact that all of the decisions are being made, at least in part, because of a single traffic event in Washington State that, as far as I can tell, has had no significant consequences for anyone except whatever insurance carrier was covering the driver…

It’s enough to make you wonder how any start-up company offering any innovative or unorthodox product manages to stay in business long enough to achieve mainstream acceptance. And while I can’t say for sure that this is a fundamental cause of the decline in the American manufacturing sector over the past few decades, it certainly goes a long way towards explaining why no one has successfully launched a new car company in the last 50 years…