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 announced Monday it will
report earnings a week from Wednesday.
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."
Contact Patrick May at 408-920-5689 or follow him at
Twitter.com/patmaymerc.
TRADING CRITICISM
Here are some excerpts from New York Times reporter John Broder's review
of the Tesla Model S, interspersed with reactions tweeted by Tesla CEO Elon
Musk.
Broder: "When I parked the car, its computer said I had 90 miles of
range, twice the 46 miles back to Milford. It was a different story at 8:30
the next morning. The thermometer read 10 degrees and the display showed 25
miles of remaining range -- the electrical equivalent of someone having
siphoned off more than two-thirds of the fuel that was in the tank when I
parked.
Musk: "NYTimes article about Tesla range in cold is fake. Vehicle logs
tell true story that he didn't actually charge to max & took a long detour."
Broder (after the Tesla ran out of power and had to be towed to a
charging station): "At 2:40 p.m., we pulled into the Milford rest stop, five
hours after I had left Groton on a trip that should have taken less than an
hour."
Musk: "Tesla blog coming soon detailing what actually happened on
Broder's NYTimes 'range test.' Also lining up other journalists to do same
drive."
Broder: "After 80 minutes of charging in Milford, the battery registered
an estimated 216 miles of range. The trip to the Tesla dealership in Manhattan
was an uneventful 71 miles. When I pulled in, the battery had an estimated 124
miles remaining."
Musk: "Am not against NYTimes in general. They're usually fair & their
own prev Tesla test drive got 300+ miles of range!"
