(Corrects market value lost in seventh paragraph)
DETROIT Nov 19 U.S. auto safety regulators have
launched an investigation into electric sports car maker Tesla
Motors Inc's luxury Model S sedan after three car fires
in six weeks, and Tesla announced it is raising the vehicle's
Tesla shares fell in premarket trading on Tuesday following
the news but they were up 3.5 percent in early-afternoon
The U.S. National Highway Traffic Safety Administration has
opened a preliminary evaluation of the risks associated with
highway debris striking the underbody of the 2013 Model S, the
agency said on its website on Tuesday. (r.reuters.com/cys74v)
Late on Monday, Tesla said it would push out a software
update to the Model S air suspension that will give the car more
ground clearance at highway speeds, and will amend its warranty
policy to cover fire damage even if it is due to driver error.
Investors appeared unfazed by the NHTSA investigation.
Stifel analyst James J. Albertine said price volatility
surrounding the probe "amounts to nothing more than noise."
The investigation could be a blessing in disguise because it
could lead to a result that "could restore Tesla's safety
reputation," S&P analyst Efraim Levy said.
The probe comes after a wave of bad publicity for Tesla -
not only the fires, but an accident at its Fremont, California,
factory that burned three workers; results and forecasts from
the company earlier this month that disappointed investors; and
even a complaint from actor George Clooney about being stuck on
the side of the road in a Tesla Roadster sports car. Tesla's
share price has dropped by more than a third since the end of
September, wiping some $8 billion off the company's market
Chief Executive Elon Musk Tweeted on Tuesday that last
Friday the company's head of regulatory affairs, Jim Chen,
"invited NHTSA senior staff to conduct a review of Model S."
But David Strickland, administrator of NHTSA, was quoted by
the Detroit News as saying Tesla did not ask for the government
A preliminary evaluation by NHTSA can lead to a recall. The
investigation, which the agency started last Friday, focuses on
two Model S fires that happened after the vehicles ran over
debris on U.S. highways.
The third Model S fire, which is not part of the NHTSA
probe, occurred when a vehicle hit a concrete wall in Mexico.
In both U.S. incidents, the Model S battery monitoring
system provided visual and audible warnings that allowed the
driver to stop the car and leave the vehicle before the fire.
"The subject vehicles caught fire after an undercarriage
strike with metallic roadway debris," NHTSA said. "The resulting
impact damage to the propulsion battery tray (baseplate)
initiated thermal runaway."
In a blog post late Monday, Musk said the company asked the
NHTSA to conduct a full investigation of the Model S fires to
correct the "false impression" that electric cars are more
dangerous than gas-powered vehicles.
He also disclosed the software update and amended warranty.
"If a false perception about the safety of electric cars is
allowed to linger, it will delay the advent of sustainable
transport and increase the risk of global climate change," Musk
Tesla shares were up $4.21 at $125.79 in afternoon Nasdaq
Tesla's decision to change the design of the Model S
suspension to provide more clearance between the undercarriage
and the road "is about reducing the chances of underbody impact
damage, not improving safety," Musk said.
A software update in January, he added, would give drivers
more control over suspension ride height.
There are 19,000 Model S sedans on the road, according to
Musk. In the latest incident, a Model S caught fire after a
highway accident in Tennessee on Nov. 7.
Musk, a billionaire entrepreneur who made his mark as a
co-founder of Pay Pal, said last week that the Model S fires
would "definitely" not lead to a recall.
(Reporting by Bernie Woodall, Paul Lienert and Deepa
Seetharaman in Detroit and Sagarika Jaisinghani in Bangalore;
Editing by Joyjeet Das and John Wallace)