Tesla to Avoid U.S. Probe of Model S Post-Crash Fire

Elon Musk’s Tesla Motors Inc., the best-performing U.S. auto stock this year, got a double dose of good news as U.S. officials chose not to probe a Model S battery fire and California deferred changes to a state program that would pare Tesla’s revenue from green-car credits.

The National Highway Traffic Safety Administration, in a statement, said today it found no evidence that the fire on a Washington state highway resulted from a Model S defect or violations of U.S. safety standards. The luxury car struck metal debris that pierced its lithium-ion battery pack, according to state officials and Tesla.

“We have a six-millimeter thick armor plate on the bottom of the car,” Musk said today in a Bloomberg Television interview. The debris “punched through that armor plate into the battery pack and crushed several of the battery cells. It took several minutes, but a few of those cells caught fire.”

Reports of the Oct. 1 fire, the first such incident involving a Tesla vehicle, triggered a 10 percent drop in the company’s shares over two days, reflecting concern the issue might tarnish the automaker. Tesla, already the biggest seller of premium battery-powered cars, has soared fivefold this year after posting its first quarterly profit, repaying a U.S. loan nine years early and expanding Model S sales to Europe and Asia.

The federal safety agency didn’t send investigators to the scene of the Oct. 1 fire because it was the first day of a 16-day U.S. government shutdown. After consulting with the company, regulators decided not to begin an investigation, which can lead to recalls.

Tesla Shares

Agency Administrator David Strickland on Oct. 22 said NHTSA was “gathering data” on the fire, which destroyed the Model S. Tesla fell as much as 3.8 percent after his remarks.

Alexis Georgeson, a spokeswoman for Palo Alto, California-based Tesla, had no immediate comment on the agency’s decision not to further investigate the incident.

Tesla rose 5.3 percent to $173.15 today in New York, up from $33.87 at the end of last year. The agency’s announcement on the fire came after the close of regular trading.

Regulators formally investigated fires in two other battery-powered vehicles, General Motors Co.’s Chevrolet Volt and Fisker Automotive Inc.’s Karma. Both of those inquiries led to recalls.

In the Oct. 1 incident, the lithium-ion battery in the Model S caught fire after the car collided with a large metallic object on a road in Kent, south of Seattle, Tesla has said. Chief Executive Officer Musk, who’s also Tesla’s biggest shareholder, defended the car’s safety in an Oct. 5 blog post, saying it was an unusual crash that would have resulted in a fire in a gasoline-fueled car as well.

California Decision

Earlier today, California’s Air Resources Board delayed a decision on a change to the state’s strict zero-emission vehicle program that would have reduced the amount of ZEV credits Tesla earns from sales in the most-populous U.S. state.

The board is considering whether Tesla’s proposed system of swapping battery packs as a way to repower its Model S meets a “fast refuel” requirement that currently earns the car a maximum of seven ZEV credits. The change would reduce the maximum for the electric car to four of the tradable credits.

Tesla reported $119 million in sales of such credits through the first half of this year, or 12 percent of its revenue. That helped the carmaker named for inventor Nikola Tesla post net income of $11.2 million for the first quarter.

The carmaker is the biggest seller of the California credits, according to an annual tally released last week.