News Column

Tesla CEO Criticizes Negative Review of Model S; Stock Dips

Feb 12, 2013
Tesla CEO Elon Musk

Shares of Tesla took a hit Monday as the company defended itself against a critical review of its new Model S sedan published in The New York Times, while the electric-car maker's CEO personally blasted the writer on Twitter.

Calling the review by Times reporter John Broder "fake" in a tweet, Chief Executive Elon Musk accused the journalist of misrepresenting the car's performance on a test drive.

"NYTimes article about Tesla range in cold is fake," Musk said in a Twitter post Monday. "Vehicle logs tell true story that he didn't actually charge to max & took a long detour."

In a statement, the Times stood by its report, saying "any suggestion that the account was 'fake' is, of course, flatly untrue. Our reporter followed the instructions he was given in multiple conversations with Tesla personnel. He described the entire drive in the story; there was no unreported detour. And he was never told to plug the car in overnight in cold weather, despite repeated contact with Tesla."

Meanwhile, shares of Tesla dropped as much as 4.4 percent before closing down 2 percent for the day; the stock edged higher in after-hours trading.

Tesla did not respond immediately to a request for comment. Regardless of whether Broder got his facts wrong about the electric car's driving range in cold weather or Musk overreacted in defense of his company, the public spat underscores just how much is at stake for the pioneering automaker as it prepares to report earnings.

Some analysts doubted the bad review would hurt Tesla over the long term. Elaine Kwei, of Jefferies & Co., said in a report that she still rates Tesla stock a buy.

"After digging into the background behind the article," she wrote, "our conclusion is that operator error likely played a primary role, due to improper charging protocol."

Some analysts also said confusion over when earnings will be announced also hurt the stock, which had risen 17 percent for the year until the troubles last week. Many investors had expected the report before the market opened Monday. On Friday, Tesla representatives had sent out conflicting messages about the announcement, but the company apparently will report earnings next week.

The Times last week published Broder's review on its website detailing how the Model S he drove in temperatures as low as 10 degrees Fahrenheit failed to meet the 300-mile range the electric sedan is supposed to get under "ideal conditions." Musk tweeted that a blog response to the article was forthcoming.

"A 2 percent drop in a fairly volatile stock is not cause for panic by any means," said analyst Alan Baum, of Baum and Associates in West Bloomfield, Mich. "This is a company that's being watched very carefully, because there are obviously very few independent car companies around. So there's a strong reaction to any news because of the focus on them right now."

Baum said the upcoming earnings report should give investors a much clearer picture of how the company is faring in its campaign to crank out 400 Model S sedans each week, which it must do to break even. The Model S is the first car Tesla has designed from the ground up. And while it won't say how many cars it's delivered so far, more than 13,000 customers have already paid $5,000 deposits.

"The big issue," said Baum, "is the broader response by customers over time to the car, which is much more important than this single article. If there are other incidents like this, that could be a concern. But I don't think we're there yet."

Source: (c)2013 San Jose Mercury News (San Jose, Calif.). Distributed by MCT Information Services.

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