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FILE- In this Tuesday, Jan. 15, 2013, file photo, George Blankenship, Tesla Motors Vice President, Worldwide Sales & Ownership Experience speaks at media previews for the North American International Auto Show in Detroit. An Internet video of a fiery Tesla electric car near Seattle helped to push down the company's stock price Wednesday, Oct. 2, 2013. (AP Photo/Paul Sancya, File)
Tesla shares fall further on Model S fire
First Published Oct 03 2013 08:31 am • Last Updated Oct 03 2013 12:15 pm

Seattle » Shares of Tesla Motors fell another 5 percent Thursday as investors in the high-flying company assessed the fallout from a fire in one of its $70,000 electric cars.

The fire began in the car’s battery after the driver hit metal debris. Firefighters extinguished the flames and no one was hurt.

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Tesla says it’s the first fire in one of its cars. Experts say electric car fires are rare, and consumers should still consider buying them.

But the sight of flames engulfing the front end of a Model S on the side of a highway in the Seattle-area has been a jolt to investors. Tesla has been a Wall Street darling this year, selling more cars than expected and posting its first-ever profit.

Shares fell 6 percent Wednesday as video of the fire surfaced. The shares were down $8.75, or 4.8 percent, to $172.20 in afternoon trading Thursday. At that price, Tesla’s market value has dropped about $2.5 billion in the past two days.

Still, if an investor purchased a share of Tesla at $35 on Jan. 2, they’re sitting on a gain of more than 400 percent for the year.

Deutsche Bank analyst Rod Lache told investors Thursday that he views the fire as an isolated incident and still expects Tesla shares to reach $200.

The liquid-cooled 85 kilowatt-hour battery in the Tesla Model S is mounted below the passenger compartment floor and uses lithium-ion chemistry similar to the batteries in laptop computers and mobile phones. Investors and companies have been particularly sensitive to the batteries’ fire risks, especially given issues in recent years involving the Chevrolet Volt plug-in hybrid car and Boeing’s new 787 plane.

In an incident report released under Washington state’s public records law, firefighters wrote that they appeared to have Tuesday’s fire under control, but the flames reignited. Crews found that water seemed to intensify the fire, so they began using a dry chemical extinguisher.

After dismantling the front end of the vehicle and puncturing holes in the battery pack, responders used a circular saw to cut an access hole in the front section to apply water to the battery, according to documents. Only then was the fire extinguished.


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The incident happened as the Tesla’s driver was traveling southbound on state Route 167 through the Seattle suburb of Kent, said Trooper Chris Webb of the Washington State Patrol. The driver said he believed he had struck some metal debris on the freeway, so he exited the highway and the vehicle became disabled.

The driver, who did not return a phone call seeking comment, told authorities he began to smell something burning and then the vehicle caught fire.

Firefighters arrived within 3 minutes of the first call. It’s not clear from records how long the firefighting lasted, but crews remained on scene for 2 1/2 hours.

Tesla said the flames were contained to the front of the $70,000 vehicle due to its design and construction.

"This was not a spontaneous event," Jarvis-Shean said. "Every indication we have at this point is that the fire was a result of the collision and the damage sustained through that."

There was too much damage from the fire to see what damage debris may have caused, Webb said.

The automobile website Jalopnik.com posted photos of the blaze that it says were taken by a reader, along with a video.

Shares of Palo Alto, Calif.-based Tesla have risen more than 400 percent this year. But some investors likely were alarmed that the fire could be an indication of a flaw in the company’s battery packs, and Tesla shares fell $12.05 to $180.95 Wednesday.

Also contributing to the stock’s decline was a rare analyst downgrade. R.W. Baird analyst Ben Kallo cut his rating on the stock from "Outperform" to "Neutral," telling investors that while he’s still bullish on Tesla’s long-term prospects, the company has "significant milestones" during the next 18 months that come with risk.

The company’s battery system and the Model S itself have received rave reviews, including a top crash-test score from the National Highway Traffic Safety Administration and a tie for the highest auto rating ever recorded by Consumer Reports magazine.

But lithium-ion batteries have raised concerns in other vehicles.

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