Kamil Khan's Sauder Blog

US electric auto make Tesla Motors’s stock dropped 30% in the past month after a disappointing financial quarter and headlines about their cars catching fire.

Tesla lost $38 million on $431 million in revenue this past quarter despite a record-breaking 5500 car deliveries and an increase in profit margins for 14% to 21%. Many investors believed that Tesla stock had an inflated price, with the New York Times calling this drop a “reality check”.

However, headlines can be misleading. On the surface, it may look like a company in turmoil. But a further investigation shows that the loss is due, not to decreased demand, but to production constraints and the expense of R&D. In fact, Tesla’s sales are increasing at an increasing rate, and the $38 million loss is simply due to Tesla’s “growth cycle as a young company still breaking ground.”

While there may be many sceptics, I think that it’s clear that Tesla is the future of the automotive industry. Like every successful technology company, Tesla has to face and overcome many hurdles, and these minor setbacks should not be seen as a weakness, but as a sign of strength.