Tags: tesla | fire | third | weeks | federal | probe

Tesla Fire, Third in a 5 Weeks, Has Some Seeking Federal Probe

Image: Tesla Fire, Third in a 5 Weeks, Has Some Seeking Federal Probe Emergency workers on Nov. 6 respond to a fire on a Tesla Model S electric car in Smyrna, Tenn.

Friday, 08 Nov 2013 05:25 PM

By Morgan Chilson

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Unexplained Tesla car fires, analyst downgrades, and slipping stock prices are plaguing the car company.

A Tesla Model S hatchback caught on fire this week, the third such incident in the last five weeks, raising questions about a federal probe of the situation, the Los Angeles Times reported. The carmaker’s stock dropped 28 percent, a lot of that happening this week.

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Add in supply problems and declining sales, and analysts cut price targets. One, Efriam Levy of Standard & Poor, even endorsed selling the stock, the Times said.

The fact that three fires occurred after car wrecks of the Tesla Model S indicated to Clarence Ditlow of the Center for Auto Safety that there’s a problem.

“There is no question that the National Highway Traffic Safety Administration should start looking at this,” Ditlow told the Times. It doesn’t necessarily mean the cars aren’t safe, the Times said, but raises questions that need to be answered.

At least one of the fires was reviewed and determined to have been caused by the accident itself, rather than any issue with the car, the Times said.

The Wall Street Journal headlined the electric car manufacturer’s “bubble trouble,” referring to the fact Tesla stock went up 372 percent this year, which points it out as a potential bubble. The company’s shares have two indicators of a bubble stock, the Journal said, high prices and that investors “are trading them like crazy.”

The WSJ pointed out that some of Tesla’s valuation is well-deserved, with owner-entrepreneur Elon Musk doing what he promised to do with the electric car company. But even before the more recent fire, analysts were looking at whether Tesla’s high valuation was justifiable, the WSJ said.

“For a company with a stock price based as much or more on image than financials, those recurring headlines are highly damaging,” an analyst Karl Brauer told the Times.

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