Tesla shares fall after mysterious car fire and analyst downgrade
Shares of Wall Street darling Tesla Motors fell 6% Wednesday after the high-flying stock was downgraded by an investment house and pictures and video of a mysterious Tesla Model S fire circulated on the Internet.
The shares dropped $12.05 to close at $180.95. Tesla has seen a huge run-up in its stock this year, as it has ramped up sales of its luxury electric cars. The stock traded at just above $35 on Jan. 2.
On Wednesday, auto enthusiast website Jalopnik posted a reader-submitted video that showed the front of a Tesla engulfed in flames on a rainy street in the Seattle area.
Tesla confirmed that one of its cars caught on fire after the driver struck unidentified metal debris on the roadway.
The crash caused “significant damage to the vehicle,” Tesla said, adding that the car’s alert system signaled a problem and instructed the driver to pull over safely. No one was injured.
A fire then caused “substantial damage” to the front of the vehicle. Tesla said that the design and construction of the vehicle and battery pack limited the spread of the fire, which was extinguished by the local fire department.
Normally, car fires are not significant events that influence investors. However, safety officials have been tracking fires in electric cars, as well as computers and other equipment, out of concern that the lithium-ion battery systems might be fire-prone.
Earlier this year, federal regulators grounded Boeing 787 planes for four months after batteries on two planes overheated, with one catching on fire. Boeing later ordered modifications to the jets to increase ventilation and insulation near the batteries, but the company and investigators never determined the root cause of the overheating.
Last year, the Chevrolet Volt plug-in hybrid came under increased scrutiny when a series of fires ignited after test crashes of the vehicle. General Motors Co. said the fires were caused by a coolant leak and short circuit that occurred when the car’s battery pack was punctured during severe side test crashes by the National Highway Traffic Safety Administration. GM has subsequently modified the vehicles to prevent the problem.
Tesla, which is among the best-performing stocks this year, also ran into head winds from a new report issued by Robert W. Baird & Co. that said the electric car maker could have trouble expanding production and developing new models. Baird & Co. downgraded Tesla to a neutral expectation from its previous assessment that the shares would outperform the market.
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