December 4, 2013 in Business

Tesla stock rebounds after passing German safety probe

Jeremy C. Owens McClatchy-Tribune

SAN JOSE, Calif. – After suffering under the weight of two car fires that sparked a federal investigation, Tesla Motors Inc. stock rebounded in a big way Tuesday after the electric-car maker announced that a German safety inquiry had ended with no concerns and a big-name auto analyst suggested shares were now “undervalued.”

Tesla shares ended Tuesday’s session in New York with a price of about $145, a gain of 16.5 percent from Monday’s closing price. The move goes against a downhill ride for Tesla: Since hitting a record intraday high of $194.50 on Sept. 30, Tesla stock had fallen as low as $116.10, a decrease of more than 40 percent.

Tesla’s decline has been alternately blamed on concerns about two Model S fires in the United States and the stock’s spectacular rise, which led CEO Elon Musk to admit that Tesla has “a higher valuation than we have any right to deserve.” Good news on the first front arrived Monday afternoon, when Tesla announced that a German investigation into the fires had found “no manufacturer-related defects.”

The fires in Washington state and Tennessee occurred after metal debris in the road punctured the underside of the drivers’ Model S electric cars, eventually causing the cars’ batteries to catch on fire and engulf the cars in flames. A third fire, in Mexico, occurred after a driver drove through a concrete wall and slammed into a tree.

After the National Highway Traffic Safety Administration announced last month that it would investigate the Model S “to examine the potential risks associated with undercarriage strikes,” Musk vociferously defended the company in a release the same day. Musk wrote that Tesla had issued a software update to its cars that will keep the underside of the car farther away from the road during highway driving and promised to amend Tesla’s warranty policy to provide coverage for any fire, including blazes caused by driver error.

Tesla has been expanding delivery to Europe and Asia, and Musk recently described Germany as “our top focus in the world” for the Model S, the first car the Palo Alto, Calif., company has fully developed and manufactured.

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