Shares of Tesla Motors Inc (NASDAQ:TSLA) could decline further due to the preliminary investigation launched by the National Highway Traffic Safety Administration (NHTSA) in connection with three incidences of Model S fires over the past several weeks, according to an analyst at Barclays.

Tesla Motors TSLA

In a note to investors, Barclays analyst Brian Johnson noted that the electric car manufacturer is strongly defending the safety of its vehicles from the Model S fire incidents, and pointing out that it is below the rate of fires compared with gasoline cars. According to Johnson, Tesla Motors Inc (NASDAQ:TSLA)’s argument “appears valid,” however he believed that the stock price of the company could decline further by 10% to 20% even if the allegations will be proven unfounded later.

Stock price of Tesla declines

Johnson based his conviction on the history of other car manufacturers that underwent investigations. According to him, “…The history of other highly publicized investigations/recalls/media scares, such as Audi in the 1980s and Toyota in 2010, shows that sales can take about a 10-20% hit, even if the allegations later prove to be unfounded. We cut our PT to $120 from $141, reflecting reduced Model S/X delivery estimates. Moreover, just as momentum led to the stock overshooting our prior PT on the way up, we can see overshooting on the way down to the ~$90 range.”

The stock price of Tesla Motors Inc (NASDAQ:TSLA) declined nearly 4% to $121.32 per share as of this writing around 12:40 in the afternoon in New York. The decline was driven by Johnson’s report.

Yesterday, Elon Musk, product architect, chairman, CEO of Tesla Motors Inc (NASDAQ:TSLA) issued a statement indicating that big leap in technology naturally invites high level of scrutiny, and he believed that it is fair for a new technology to be held to a higher standard. However, he emphasized, “there should be some reasonable limit on how high such standard should be.”

Tesla started the production of the Model S last year

Musk pointed out that since Tesla Motors Inc (NASDAQ:TSLA) started production of the Model S last year, more than 250 million gasoline car fires occurred in the United States alone, which resulted to over 400 deaths and 1,200 injuries based on the 2012 NFPA data.

According to Musk, the three incidents of Model S fires, which only happened due to high-speed collisions with no injury or death, received more national headlines than all the 250,000+ incidents of gasoline fires that are far more deadly.

Musk said, “Reading the headlines, it is therefore easy to assume that the Tesla Model S and perhaps electric cars in general have a greater propensity to catch fire than gasoline cars when nothing could be further from the truth.” He emphasized that the the recent media coverage regarding Tesla Motors Inc (NASDAQ:TSLA) “vastly exceeded” the required high standard for the electric car.

Furthermore, Musk said, “Our primary concern is not for the safety of the vehicle, which can easily be replaced, but for the safety of our customers and the families they entrust to our cars. Based on the Model S track record so far, you have a zero percent chance of being hurt in an accident resulting in a battery fire…”