Another Tesla Car Catches Fire - Analyst Blog

Tesla Motors, Inc.’s (TSLA) problems with car fire do not seem to end. Business Insider reported that another Model S caught fire earlier this month after the owner had parked it following a drive. The worrying fact is that the car was neither charging nor hit by road debris, as in the previous cases.

The latest incident occurred in a four-month old Model S in Toronto. The cause of the fire is not known yet, although Tesla revealed that it did not start off in the battery, the charging system, the adapter or the electrical receptacle of the car.

Tesla is already undergoing a safety investigation by the National Highway Traffic Safety Administration (NHTSA) related to the previous fire incidents. In early October, the first Model S electric vehicle caught fire near Seattle, WA.

This mishap was soon followed by a fire in another Model S car in Merida, Mexico. The third Model S vehicle reportedly caught fire on Nov 7, 2013 near Smyrna, TN, after the vehicle hit road debris. The collision led to fire in the front portion of the vehicle.

Thereafter, on Nov 15, 2013, a garage fire took place in Irvine, CA while a Model S was being charged via a wall socket. Tesla declared that the over-heating of the charging system was not responsible for the fire.

Nevertheless, Tesla announced certain measures, including software updates, an upgraded wall adapter and expansion of the warranty coverage to increase safety and pacify investors and prospective buyers. The company holds the record of not having any deaths or permanent injuries to passengers in any of its cars, during the six years that its cars have been in the market.

In fact, the German Federal Motor Transport Authority or Kraftfahrt-Bundesamt (KBA) did not find any manufacturing defect in Tesla’s Model S during its investigation. However, a government filing by the electric carmaker acknowledges that the lithium ion battery cells used in the car have the risk of catching fire or emitting smoke.

It is worth noting that the NHTSA recently reiterated the five-star vehicle safety rating on Tesla’s Model S car of model year 2014. The car holds a five-star rating overall and also in each of its subcategories.

CEO Elon Musk expects Model S to be cleared by the NHTSA. He believes that the car is safe and hence, does not expect the ongoing investigation to lead to a recall.

Tesla currently carries a Zacks Rank #1 (Strong Buy). Some other stocks worth considering in the auto industry are Geely Automobile Holdings Ltd. (GELYY), Volkswagen AG (VLKAY) and Dongfeng Motor Group (DNFGY), all of which carry a Zacks Rank #2 (Buy).

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