Shares of Tesla Motors (TSLA - Get Report) dropped more than 2% after markets closed Thursday following the company confirming that regulators had opened a preliminary investigation into a fatal crash involving a Tesla Model S operating in "autopilot" mode. The crash, though tragic, might prove to be the result of a series of unfortunate accidents. What the ordeal says about the company, however, should be a word of caution for investors.
Tesla, in a post on the company blog, said it learned Wednesday evening that the U.S. National Highway Traffic Safety Administration had opened what the company called "a preliminary evaluation" into how the autopilot function performed during a crash which happened in Florida in early May. The company said the vehicle was on a divided highway with autopilot engaged when a tractor trailer heading the opposite direction made a left turn in front of it, and according to the company neither the driver nor the autopilot saw the white truck against the bright sky.
Tesla in its statement emphasized that the crash was the first known fatality in about 130 million miles driven with autopilot activated. The company also noted that a number of relatively unusual factors that went into the crash, including that the collision occurred with the trailer's midsection and therefore only impacted the top half of the Model S, meaning that many of Tesla's crash safety systems that would have activated had the truck impacted the front or rear of the car were ineffective.
The automaker noted safety features including disabling the autopilot by default, and notes that activating it requires the driver to read the company's warning that they must keep their hands on the wheel and eyes on the road at all times.
But those sorts of warnings have long been greeted with skepticism from safety advocates, and this particular crash is sure to rekindle criticism that Tesla and CEO Elon Musk are pushing the technology forward too rapidly. Critics have accused Tesla of applying Silicon Valley software beta standards on the auto industry.
A Volvo safety engineer earlier this year argued the Tesla system gives the impression that it does more than it is actually capable of doing, potentially causing drivers to lower their guard. Other automakers have kept their systems off public roads for now, preferring to limit testing and data collection to private tracks.
As auto journalist and noted Tesla critic Bertel Schmitt said on Twitter on Thursday night, the "auto industry has worried about this ... Tesla apparently has not."
The fear that Tesla is moving too quickly can be applied much more broadly than to just its autopilot technology. The company is attempting to grow auto production from 50,000 deliveries in 2015 to 500,000 units by 2018 and 1 million units annually by 2020, a feat that even if successful will cost billions and opens the company up to quality control concerns.
On top of the lofty sales ambitions, Tesla is also attempting to build out its global network of stores and supercharger stations, bring its massive Gigafactory battery production plant online and up to speed, and continue work on its in-house battery units. And earlier this month Tesla went public with a $2.8 billion offer for money-losing SolarCity (SCTY) , another Musk-affiliated company, threatening to tax both Tesla's balance sheet and management resources.
Taken all together it is easy to paint a picture of a company pushing too fast for its own good. Tesla has products that are adored by an ever-growing fan base, but for investors to make money in the long-term the company has to prove it can do the hard work of turning those grand ideas into quality products that will keep the ranks of its admirers growing.
It is far too early to say if Tesla's aggressiveness in rolling out new features contributed to the fatal crash in Florida, and inappropriate at this point to base an investment case based on one accident. But regardless of this one incident investors should keep in mind that Tesla is a company prone to pushing the envelope. There are at times when slow and steady is the better path.