The National Highway Traffic Safety Administration said today it has opened a formal investigation into the safety of the Tesla Model S electric car following two reports of battery fires after striking roadway debris.
The agency said its safety investigation was prompted by recent "undercarriage strikes" in Washington state and Tennessee. In both cases, fires resulted after the cars both ran over debris on the road that pierced the battery compartment. After news of the probe broke, Tesla shares fell to $116 in pre-market trading but climbed back once the market opened. Tesla shares were trading up $5.87, or 4.7%, to $127.43 in the first hour of trading.
Early Tuesday before NHTSA's announcement, Tesla CEO Elon Musk announced that he taking three steps as a result of the fires, but added that he stands behind their safety. The steps were:
•Higher ground clearance to make them less likely to strike road debris that can potentially penetrate the battery pack and ignite a blaze.
•Asking federal safety regulators to "conduct a full investigation as soon as possible into the fires." Musk gave no hint that NHTSA was about to open an investigation.
•Amending the cars' warranty to cover damage due to fire.
A NHTSA probe can lead to recall, but earlier this month Musk says he has no plans to order one because he doesn't think it is warranted. The probe comes at an awkward time for Tesla, which has reported profitabiliity in recent quarters and saw a huge runup in the price of its stock. Even before announcement of the probe, Tesla shares had been taking a beating. Since the report of the two fires, plus one involving a traffic accident in Mexico, the stock price has fallen from about $180 a share a month ago. A day before the probe was announced, Tesla shares fell 10.2%.
Musk announced the steps in a lengthy post on Tesla's blog. In it, he offers yet another strong defense of the car's safety, especially as it relates to protection from fire. "We believe the evidence is clear that there is no safer car on the road than the Model S," he writes. His company expects to produce more than 20,000 of the electric cars this year, which sell for about $70,000 and up.
He calls media reaction to the three fires a gross overreaction, especially given how thousands of conventional cars have been consumed by gasoline fires from ruptured tanks over the years.
He says his battery-powered car is actually safer than just about any gas-powered car on the road.
"Since the Model S went into production mid last year, there have been over 400 deaths and 1,200 serious injuries in the United States alone due to gasoline car fires, compared to zero deaths and zero injuries due to Tesla fires anywhere in the world."
In the posting of its investigation, NHTSA noted that passengers in the Teslas that caught on fire were able to escape. "In each incident, the vehicle's battery monitoring system provided escalating visible and audible warnings, allowing the driver to execute a controlled stop and exit the vehicle before the battery emitted smoke and fire," NHTSA writes.
Two of the Tesla fires were caused when the vehicle struck road debris that pierced the battery compartment. The third happened in Mexico when a Model S crashed. In each case, the occupants escaped unharmed. Musk says it's proof of the car's safety.
But given the media outcry, Musk indicates he decided to act even though he already stands by the car. He says the plan to create more ground clearance under the cars has already been implemented.
Tesla has already sent a signal to the computers in all Model S cars to tell them to increase the vehicle's ground clearance at highway speeds. he says the goal is to reduce the chance of hitting objects on the road. Another software update in January is aimed at letting drivers set their preferred road height for themselves and passengers.
As for the NHTSA involvement in probing the three accidents that led to fires, Musk says that if regulators offers suggestions on how to improve fire safety in the Model S, he will immediately implement them. he has previously said he does not expect that the Model S will need to be recalled over the fires.
When it comes to extending the warranty on the sedan, Musk says his decision will apply to Tesla models and be applicable even if the driver is held to be a fault for the fire.