Friday, November 22, 2013

After 3 Fires, Safety Agency Opens Inquiry Into Tesla Model S

For the first time, regulators are examining whether the design of the high-end vehicle and its advanced lithium-ion battery pack are defective and the cause of two battery fires.

After garnering high praise for its styling, performance and eco-friendly electric power, the Model S will be the subject of scrutiny by the National Highway Traffic Safety Administration. Tesla’s chief executive, Elon Musk, said the company welcomed the inquiry.

At issue is whether the size, shape and chemical makeup of the car’s battery makes it prone to fires when its lithium-ion cells are punctured in a collision.

Mr. Musk has repeatedly defended the design of the Model S, which won early accolades for its safety from regulators and independent publications like Consumer Reports. But the car has caught fire on three occasions in less than two months — twice in the United States and once in Mexico.

By comparison, the Nissan Leaf — the best-selling all-electric car on the market — has not had any reported fires.

A federal defect investigation can take months to complete, and could include crash tests of the vehicle well beyond the ordinary government testing done on cars before introduction.

Tesla said it would increase the ground clearance of the Model S, and it also pledged to extend its current vehicle warranty to cover fire damage.

But those changes are not expected to divert the focus of the investigation, or minimize the potential for the safety agency to order structural changes and a vehicle recall.

“Adjustments or modifications of the vehicle will not affect the inquiry,” said Karl Brauer, an analyst with the auto research firm Kelley Blue Book. “That is out of Tesla’s hands now, and the range of potential outcomes is very wide.”

As a start-up company in the keenly competitive global auto industry, Tesla has, until now, enjoyed remarkable early success with its Model S luxury sedan.

Mr. Musk’s track record as a Silicon Valley entrepreneur gave the company credibility that helped it secure a $465 million loan from the Department of Energy in 2010.

Glowing reviews of the Model S, which is priced at $70,000 and higher, fueled investor interest in a public stock offering that allowed Tesla to pay back its government loans early.

The company has since become a darling of Wall Street because of steadily growing sales of the Model S and Tesla’s promise to bring less expensive models to market in the future. Tesla stock, which has slid about 35 percent from its high, closed at $126.09 on Tuesday.

But the safety agency inquiry has raised questions about what was perceived to be one of Tesla’s greatest strengths — its technological superiority.

Mr. Musk has not retreated from his position that the Model S is safer from fires than vehicles with gasoline engines.

And in a blog posting on the company website on Monday, Mr. Musk went so far as to assert that Tesla asked federal regulators to conduct the safety investigation to allay any fears about electric cars. “There is a larger issue at stake,” Mr. Musk wrote. “If a false perception about the safety of electric cars is allowed to linger, it will delay the advent of sustainable transport and increase the risk of global climate change, with potentially disastrous consequences worldwide.”

The agency flatly denied on Tuesday that the inquiry was opened because of a Tesla request.

The swift rebuttal of Mr. Musk underscores how Tesla’s relentless promotional campaign is wearing thin on regulators charged with making the nation’s vehicles and roadways safe.

The agency, in fact, had originally cleared the Model S of possible defects after the first vehicle fire, which occurred Oct. 1, when the car struck a metal object on a highway in Kent, Wash., outside of Seattle.

A high-speed crash in Mexico on Oct. 18 also resulted in a fire, but that incident was beyond the scope of American regulators. A third fire occurred on Nov. 6 on a highway in Smyrna, Tenn., near Nashville, after a Model S ran over a tow hitch in the roadway.

That accident prompted regulators to revisit their earlier pronouncement of the car’s safety.

“The agency has opened a formal investigation to determine if a safety defect exists in certain Model S vehicles,” the agency said in a statement on Tuesday.

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