Second Tesla Model S Battery Fire Causes Stock Plunge

By · October 29, 2013

Model S after Mexican fire

The Model S after the Mexican fire is caught in this grainy shot. It doesn't appear that the car was "completely consumed," as some Mexican press accounts have it.

Tesla Motors’ stock continued to dive in the wake of a second fire involving a Model S that had been in an accident, this time near Merida, Mexico. After dropping to $162.86 on Monday, the stock was at $156.71 (down 6.23 percent) at press time.

Bad Accidents, Unhurt Drivers

Once again, the circumstances of the accident would tend to reinforce Tesla’s claim that a battery fire is only likely in extraordinary circumstances, and even then the driver will walk away. The car’s driver, who according to Diario de Yucatan, had been drinking, rammed into two walls at a high rate of speed and came to rest against a tree. But he was not significantly hurt, said Tesla spokeswoman Liz Jarvis-Shean.

“We were able to contact the driver quickly and are pleased that he is safe,” she said. “This was a significant accident where the car was traveling at such a high speed that it smashed through a concrete wall and then hit a large tree, yet the driver walked away from the car with no permanent injury. He is appreciative of the safety and performance of the car and has asked if we can expedite delivery of his next Model S."

Although declining to talk on the record, Tesla points to the tremendous force of the Mexican accident, which occurred after the driver left the pavement in a roundabout. The destroyed wall is below. Tesla says that the battery pack was a sacrificial lamb to protect the occupants.

The Tesla hit this wall

The Model S in the Mexican accident left a roundabout and demolished this wall.

Back into the Fire

Tesla thought it had put fire problems behind it after the National Highway Traffic Safety Administration (NHTSA) cleared the company from responsibility in the first fire, which occurred October 1 in Washington State. In that case, the car—owned by a Tesla investor—hit a “large metal object” in the road, punching a hole in the armor plate that protects the battery. The owner, who wasn’t injured, is getting another Model S.

Model S fire in Washington

The Model S burns fiercely in Washington State on October 1.

Jarvis-Shean said after the Washington fire that the battery pack's design limited fire damage. "Because each module within the battery pack is, by design, isolated by fire barriers to limit any potential damage, the fire in the battery pack was contained to a small section in the front of the vehicle," she said. Whether that's also true in the Mexican case is unclear—the circumstances are murkier.

NHTSA doesn’t investigate foreign auto accidents, so there will be no U.S. inquiry into this incident, either. But that won’t stop concern about Tesla fires, or the value of the company’s stock.

Lingering Concern

Still, enough ambiguity exists over these two incidents to make it likely that Tesla will survive to fight another day. If a Model S caught fire on its own, or injured an occupant, that would be another story. The stock hasn't yet fallen a huge amount, and some think it is in any case considerably over-valued.

Reaction is trickling in. Phil Gott, an analyst for IHS Automotive, comments, "It is hard to respond without seeming to be sensationalist, as we don't know how well a similar gasoline-fueled car would have performed under identical circumstances. Yes , batteries store energy and can burn in a crash in a manner similar to a tank full if gasoline."

And Eric Evarts, senior associate autos editor at Consumer Reports—which gave Tesla its highest rating for the Model S—said, "I'd just note that [the Model S] doesn't depend on carrying around a big tank of combustible liquid to run on, and the Model S absolutely aced all its crash tests."

Jack Nerad, an executive market analyst for Kelley Blue Book, says to put the Tesla incidents--horrific as they may be--in context. "Vehicle fires happen virtually every day, but because of the recent flurry of publicity surrounding Tesla Motors--and because many people seem to believe that fire is unlikely in an electrically powered vehicle--the two recent Model S fires have received international publicity," he said. "One thing the incidents indicate is that a vehicle fire in an electric vehicle is a real possibility, especially in EVs using lithium-ion batteries, given specific circumstances that compromise the integrity of the battery pack."

You can see the Mexican fire in progress from a bystander’s impromptu video below:

If Tesla is smart, it will quickly announce new measures to guard against battery fires, or even a voluntary recall and retrofit of some safety equipment. So far, Tesla hasn't reacted to the second incident on its blog.

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