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Originally published November 7, 2013 at 6:12 PM | Page modified November 8, 2013 at 6:27 AM

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Tesla shares slip more on reports of third fire, other problems

A new car fire and mounting complaints about noise in a drive unit are taking the shine off the maker of high-end electric cars and its stock.


Los Angeles Times

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Tesla Motors shares continued to fall Thursday as the automaker confirmed a third fire in one of its high-end electric cars and a major auto reviewer pointed out problems with its Model S luxury hatchback.

The stock’s decline of $11.39, or 7.5 percent, to $139.77 came after a 15 percent plunge Wednesday, when the automaker said limited supplies of batteries were crimping sales and that it was spending heavily on research and development for new models.

Car-shopping website Edmunds.com said Tesla’s 2013 Model S, which runs about $70,000, was “making an ominous noise under acceleration and deceleration. It originates from the rear of the car and seems to be getting worse.”

That complaint is starting to show up on Tesla’s owners forum, an online discussion group hosted by the automaker for drivers of its cars.

“Mine had that, and it got bad at 70 mph,” said one owner, posting under the “mortgagebruce” moniker.

He said Tesla had to replace the drive unit twice to fix the problem.

Tesla also replaced the drive unit on the Edmunds car but declined to tell the company what caused the problem. It also replaced the driver-door mechanism because of another problem. The car has just less than 11,000 miles on the road.

“We’re not sure what to think about the fact that both of these repairs were completed with just one overnight stay,” said Mike Schmidt, Edmunds’ vehicle-testing manager. “Maybe the dealer is really on the ball. Maybe the supply chain is short. Or maybe the parts are readily available because they’ve seen these before.”

Tesla spokeswoman Liz Jarvis Shean said she was not familiar with the Edmunds complaint.

Meanwhile, another Model S electric car caught fire Wednesday in Tennessee, after a crash.

This was the third Model S to have caught fire since October. One burned on Highway 167 in Kent and another in Mexico. Both cars were in crashes, and the fires injured no one.

The National Highway Traffic Safety Administration (NHTSA) “absolutely has to investigate” the Tennessee incident, said Clarence Ditlow, executive director of the Washington, D.C.-based Center for Auto Safety.

A Model S driver struck a tow hitch in the middle of a lane on Interstate 24 near Murfreesboro on Wednesday, damaging the car’s undercarriage and causing the fire, said Dalya Qualls, a Tennessee Highway Patrol spokeswoman. The driver pulled the car over and was uninjured, Qualls said.

The NHTSA declined to investigate the Model S fire in Kent, the first such reported blaze, in which metal debris was involved.

“It appears there’s inadequate shielding on the bottom of these vehicles,” Ditlow said. “Road debris is a known hazard to the undercarriage of vehicles.”

The U.S. agency “will contact the local authorities who are looking into the incident to determine if there are vehicle safety implications that merit agency action,” NHTSA spokeswoman Karen Aldana said in an email.

Car fires usually are not significant events that influence investors. There are about 150,000 annually, according to the National Fire Protection Association.

The NHTSA reviewed the Tesla fire in Kent and concluded it was caused by the accident rather than a vehicle defect.

Tesla said it contacted the driver of the car in Tennessee and noted he was not injured and “believes the car saved his life. Our team is on its way to Tennessee to learn more about what happened in the accident.”

“The problem is that we have three fires in six weeks,” said Karl Brauer, senior analyst at Kelley Blue Book, the car-information company.

“For a company with a stock price based as much or more on image than financials, those recurring headlines are highly damaging,” Bauer said.

Material from Bloomberg News is used in this report.



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