Market News

 January 15, 2014
Tesla boosts sales despite safety issues

 Electric car upstart Tesla brushed off a new safety issue Tuesday as it turned in fourth quarter sales numbers that underscored its dominance of the US electric car market.

Tesla founder Elon Musk said that the National Highway Traffic Safety Administration recall announcement for a charging adapter for Tesla's hit Model S should not be branded a "recall", since the issue was addressed electronically via a software update.

Fourth quarter sales numbers underpinned that confidence. Tesla sold about 6,900 of its luxury electric sedans in the period as the company continued to step up production to meet a huge backlog of orders.

For the entire year Tesla remained just under 20,000 cars, and the recent quarter's pace suggested it could grow another 40 percent or more this year.

That showed that avid buyers shrugged off safety concerns that arose last year after three Tesla Model S caught fire. All three hit hard objects on the road which broke holes into the car's battery protection plate underneath, causing the batteries to overheat and burst into flame.

No one was hurt in the incidents, and the company has insisted that regular cars suffer fire incidents at a much higher rate.

"People realize it is a very safe car... one of the safest, if not the safest, car on the road," Tesla vice president for global sales Jerome Guillen said at the Detroit auto show on Tuesday.

Even so, the NHTSA is investigating to see if there is an overriding safety concern, while Tesla says it is working to boost protection from objects in the roadway.

Guillen would predict only "reckless growth" for this year, with sales picking up in Europe after the US and Canada markets, and the car's first deliveries in China coming within weeks.

Despite a price that begins at around $64,000 and rises above $100,000 in the United States, after subsidies, Tesla has staked out center ground in the electric market, where unit sales reached only around 96,000 units, a drop in the bucket of the total US car market of some16.5 million vehicles.

With its roots in Silicon Valley and selling its cars online instead of in dealerships, Tesla still plays the industry outsider, and this week Musk again snubbed the annual Detroit show, the country's premier vehicle showcase.

Amid pre-show expectations it might be unveiled in Detroit, Guillen would not even provide an update on the next Tesla model, an SUV crossover dubbed Model X, but to say it would be eventually launched at a Tesla event and not in Detroit.

On top of its good looks, Tesla's strengths have been some of the best quality and safety ratings from industry experts.

But its strength in a mostly gasoline-fueled industry is boosted by a growing network of "supercharger" stations that it promises will very soon allow a Tesla owner to cross the country without fear of running out of power.

In addition to slow charge stations more widespread, the supercharger chain now has 80 sites, and the company is opening nearly one a day, according to Guillen.

"The cross-country route is almost finished," he said.

Tesla has the cash as well to continue that effort. The company's shares were fairly static for three years after its 2010 initial public offering, but took off last year, taking its market value to nearly $19 billion.

That compares to $55 billion for General Motors, a company which sold 9.7 million cars last year, more than 500 times Tesla's output.

Tesla's shares were up nearly 13 percent to $157.33 on Tuesday after the sales announcement and Musk's defense of the company after the problem with the charging adapters, some of which had caught on fire.

"No Tesla vehicles are being physically recalled," he said via Twitter. "There was an over-the-air software update," and Tesla is mailing new adapters to customers.

"The word 'recall' needs to be recalled," he said.