Tesla Motors Inc (TSLA) Model S Recall Depends On NHTSA Investigation

Tesla stockBlomst / Pixabay

Tesla Motors Inc (NASDAQ:TSLA) may be subjected to a defect investigation depending upon the decision made by U.S. authorities to either mark recent fire incidents as freak occurrences or due to shortcomings in the design of the car, says a report from Bloomberg. If the authorities do go for a defect investigation it may result in a recall.

Musk denies any recall

Elon Musk, CEO of Tesla said “there’s definitely not going to be a recall” of the Model S, but the end decision is not in his hands.

Dan Edmunds, director of vehicle testing at Edmunds.com, an automotive information website based in Santa Monica, California said, “There’s no Pinto moment here, they may look at it and say it’s actually not that bad.”

Last week, a Tesla Motors Inc (NASDAQ:TSLA) Model S caught fire in Tennessee, and its driver said that his car banged into a trailer hitch loose in the road at a speed of 70 miles per hour. On October 1, a similar accident took place in Washington State, where a Model S ran into a piece of metal debris. A third fire incident occurred on October 18th in Mexico after a crash.

Musk blames media

The first Model S fire incident sailed smoothly through the investigation with the National Highway Traffic Safety administration (NHTSA) stating that it found no evidence that the fire was caused by a violation of US safety standards. Two months before the incident occurred, Tesla earned a five star rating in each category of the agency’s crash test.

Musk, while giving an interview following the Business Insider conference in New York yesterday, said that the company is in regular contact with the authorities. He added that NHTSA is more busy dealing with the other accident cases where people are in serious condition or die, and doesn’t have time to look into petty matters blown out of proportion by media.

There has not been any word from NHTSA since its statement on November 8, where the authority said that it is in close contact with Tesla, as well as local authorities collecting more information about the accident to reach a decision.

Tesla shares since the incidents

While probing the incident to find a possible defect, authorities will consider the rate at which Tesla Motors Inc (NASDAQ:TSLA) vehicles caught fire in comparison to other vehicles. Also, they will investigate if accidents are occurring under normal road condition or unusual conditions along with the intensity of the accidents and whether they caused any serious injuries or not.

Tesla Motors Inc (NASDAQ:TSLA) shares closed at $137.80 in yesterday’s trading session, which is a drop of 29% since the first fire incident. Tesla’s stock climbed more than five times through September 30 reaching a record closing price of $193.37 at that time.

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About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com

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