Telsa Motors Inc. (NASDAQ:TSLA) is loved by a small group of loyal consumers. And depending on when they bought, TSLA stock is also loved by a small group of investors.
But the truth behind the electric vehicle manufacturer and Tesla stock isn’t as simple as some say.
On the one hand, the all-wheel drive P85D version of the Tesla Model S sedan set an undeniably high bar this year after scoring 103 on Consumer Reports‘ 100-point rating scale.
However, the buzz for TSLA stock was short lived. After Consumer Reports revoked its “recommended” rating for the Tesla Model S in October thanks to a “worse-than-average overall problem rate” and fears about reliability.
As for Tesla stock itself, TSLA is up slightly on the year in a tough market overall — and, of course, is up an amazing 600% in the last three years or so. However, TSLA stock is also down over 20% from its July highs.
So what’s the true story of Tesla Motors Inc? Is this a company that’s disruptive and naturally the target of naysayers … or are the promises of TSLA stock and the dreams of CEO Elon Musk just not in line with the reality?
Unfortunately for Tesla stock holders, a recent report indicates it’s the latter.
TSLA Stock Suffers Under Reliability Concerns
Plug-In America, an organization dedicated to electric and hybrid vehicle technology, surveyed 327 respondents among the first batch of Tesla Model S owners. And their findings, according to reports, indicate roughly two-thirds of the first-generation Model S drivetrains needed replacement.
Not only is that a massive bit of maintenance, the drivetrain failure typically occurs within the first 60,000 miles, according to the report.
That’s simply stunning, and a huge blow to Tesla Motors Inc. at a time when it continues to suffer with reliability concerns. Not only is the Model S under fire, but the supply chain in general has long been a big question mark thanks to repeated delays.
Remember, TSLA stock cut its full-year production target this summer in part because of complications accommodating production of its Model X electric SUV. And by the way, the Tesla Model X is actually two years late already!
Now, a few caveats here: The survey was a pretty small sample size, and it’s probably not a surprise that the very first Tesla vehicles ever made are a little problematic. However, given the other press it’s still not very good for the brand … or TSLA stock.
The million dollar question will be whether the Model X can deliver on high expectations for both drivers and Tesla stock holders. Also important is whether the Model S can withstand competition from rivals including the Chevy Volt from General Motors Company (NYSE:GM) or smaller but more affordable models like the Focus Electric from Ford Motor Company (NYSE:F) or the Leaf from Nissan Motor Co Ltd (ADR) (OTCMKTS:NSANY), among others.
TSLA stock holders like to talk about innovation and about long-term plans like the Gigafactory or battery technology writ large. However, the entire narrative of Tesla hangs on whether CEO Elon Musk has actually delivered on his futuristic visions or whether the reality doesn’t match with the hype.
If this report on Tesla Model S failures gains traction — or worse, if future findings validate the data — it could be the end of the road for TSLA stock.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP.
