Tomahawk, WI 11/12/2013 (BasicsMedia) – Reports of a third fire burning Model S last week nearly sent Tesla Motors Inc (NASDAQ:TSLA) hurling down like stone on the browsers. Thankfully the stock is picking up rather strongly. In span of six weeks, three Model S cars have been involved in accidents which resulted in fire. But no occupants have reported injuries from the fires. However, as media ran away with the fire reports, investors were kind of starting to recoil from Tesla.

People are tolerant to dangers, fire will not dim Tesla

It appears that fires will not dim the future of Tesla even if some more were to occur as the company increases its cars in the market. The reason is that typically, human beings are more tolerant to dangers, and this could hold true for Tesla. Consider the history of car and aircraft accidents.  Globally, a lot of people are injured on the roads, yet cars have continued to be used for transportation. The same could be said of planes. They occasionally plunge or catch fire yet the more they grow in popularity. Well, this comparison doesn’t mean that Tesla’s machines have license to catch fire and maybe hurt people. The reason for comparison is that for accidents, none of the existing automakers today has a thoroughly clean record. The focus turns to Tesla when its cars catch fire because it’s a younger player in the industry and everyone is carefully watching its step.

Following the reported fires so far, the all-electric carmaker has stated its intent to investigate the cases. This is expected to result in improved underlying surface of the cars which leads to problems when the cars run over metals. Doing this will effectively reduce the frequent fires and give the company its peace as it strives to appeal to a wider auto market. Also, having seen the problem in Model S, the expected Model X should feature improved resilience to such metal piercing.

Cut on electric car subsidies is a threat

The real threat to Tesla’s future however, could be Fed’s consideration to reduce the subsidy on all-electric vehicles, yet this is considered the automaker’s lifeblood. The reduction on subsidies on electric vehicles registration is also expected at state level and this has the potential of greatly effecting Tesla’s top-line. The reason for these considerations is that it has been concluded that after all, production and disposal of the huge batteries used to power the cars require high energy cost which offset the efforts to attain a clean environment through electric cars. Also, while the electric environmentally friendly, it appears that their uptake will be quite slow, thus dragging the reduction in carbon emission on the roads. As such, the subsidies on electric cars could be trimmed by as much as 40% from 2015. This would certainly be a big threat to Tesla.

Buyers if electric cars have been enjoying big fed and state subsidies thus encouraging the uptake of the cars. And with Tesla leading the clean energy car segment, its future appeared well spelt out if the subsidies were maintained. The company is yet to issue a comment regarding the consideration to slash subsidies on electric cars.

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