Advocacy Group Criticism Shows Potential Material Impact of Tesla Crash

The company has maintained that a Florida crash involving its autopilot technology is not material to operations. But the scrutiny, and rhetoric, surrounding the crash show no sign of subsiding
By Lou Whiteman ,

A consumer group is calling on Tesla Motors (TSLA) - Get Report to either disable its suddenly controversial autopilot feature or pledge to accept full liability for any incidents, highlighting the risk to the automaker following a May crash.

Tesla has been under fire this week from critics who argue the company should have disclosed details of a fatal incident in Florida before raising more than $1.4 billion in a secondary offering. The company and its CEO, Elon Musk, have sharply rebuked those contentions, arguing in part that the crash is still under investigation and noting that other automakers are not required to consider every accident involving one of their vehicles to be material.

Those who have argued for better disclosure contend that with Tesla positioned as a premium brand in part due to its superior technology, any dent in that reputation could have an oversized impact on the brand and future sales. Santa Monica, Calif.-based Consumer Watchdog, an advocacy group, in a letter to Musk gave voice to those fears, accusing the company of "in effect using your customers as human guinea pigs."

The group notes that Tesla officials have both talked up the autopilot technology -- with Musk himself famously telling reporters the car was "almost able" to go from San Francisco to Seattle without anyone touching the controls -- while still saying the technology is in beta testing and warning users to not to take their hands off the wheel.

"You want to have it both ways with autopilot," the group wrote. "On the one hand you extol the supposed virtues of autopilot, creating the impression that, once engaged, it is self-sufficient. ... On the other hand you walk back any promise of safety, saying autopilot is still in beta mode and drivers must pay attention all the time."

The group adds "the result of that disconnect between marketing hype and reality was the fatal crash in Florida, as well as other nonfatal crashes that have now come to light."

Tesla management and advocates would likely take issue with the claim that marketing hype led to the Florida crash, but right or wrong, the group raising the issue and using such rhetoric speaks to the idea that the event could prove to be much more material to the automaker than calling it a single crash would imply.

A mandate to disable autopilot would both eliminate a key part of Tesla's marketing message and remove one of the company's potentially lucrative upsell packages for new customers. Either could materially impact future revenue.

To be fair to Tesla, it's hard to concoct a scenario in which one crash would cause Tesla's legion of loyal fans and potential buyers to abandon the company. But it is also growing harder to argue that what happened in Florida was just another accident and that in no possible way will it have any impact on Tesla's future success. Irrelevant incidents tend not to result in an advocacy group implying a company is using its customers as test subjects.

Better safe than sorry.

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