Tesla Motors (TSLA) – on Fire!

By Noshee

Tesla Motors (TSLA) continues to draw media coverage and stock analysis galore as its eco-friendly sports cars are showing up in more and more driveways across the globe. Particularly popular in the U.S., where the company is headquartered, cars are still being reserved heavily in advance of production.

Although Tesla is an oft-talked about company at any time of year, there have been several, recent developments that have made it even more intriguing for owners and analysts. The first comes out of Germany, where Tesla was cleared of charges that manufacturer defects caused three fires in its Model S car. Tesla shares had skyrocketed to a high of $190 before the fires were reported at the end of September, and they then plummeted in October and November (made low of $116.10) when the incidents came out. Two of the fires occurred in the U.S. after the cars rode over debris on the highway at normal speeds, while the third fire took place in Mexico after a serious accident. Tesla maintained all the while that these were normally occurring accidents and did not incur any wrongdoing on its part. Do fires happen more often with standard gasoline cars? So says Tesla. Is Tesla really being singled out? If so, investors became fearful in any case, as happens when stories like this emerge.

German authorities agreed with Tesla’s claim after an investigation and safety authorities have made no issue with the sports cars. U.S. investigators continue their probe, but Tesla’s shares immediately shot back up after the news from Germany (and CEO Elon Musk’s immediate, celebratory Tweet.) the company got another boost after Morgan Stanley’s Adam Jonas chose Tesla as his top pick in the automotive sector. So, after all, Tesla seems to be getting back on track. As of this writing on December 8th, 2013 TSLA shares are trading at $137 level.

While the company has been dealing with bad press from the fires, they’ve also come under pressure related to battery issues. Customers have claimed that batteries continue to use power even after the cars have been turned off – the company has called these batteries defective and sent new ones to owners, but they will have to figure out why this is happening in the first place and prevent further episodes. And are the batteries the problem with the fires in the first place? While investigators check it out, anecdotal evidence points to the large batteries underneath the car which can get hit by debris and catch fire upon impact. Is this a design defect? Even if Tesla is cleared in all investigations, will fires continue to haunt the company?

In the meantime, Tesla is forging ahead with production, purchasing thousands of ion cells for their batteries from Panasonic in Japan, which are being used to meet greater demand for their cars. This alone is a significant factor in where Tesla is headed – so far, demand is still growing, and European interest is picking up. The company is also producing more of its superchargers, which can load up a car in twenty to forty minutes, and placing them in more areas of the country – currently, they are only on the coasts and in Texas.

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