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Tesla Shares Burned by Third Car Fire

Paul Ausick

For the third time in six weeks, an electric vehicle from Tesla Motors Inc. (TSLA) caught fire on Wednesday. This incident occurred in Nashville, and Tesla said that it has contacted the driver and he reported being unhurt. The company said it is sending a team to investigate.

Tesla has chosen to take the high-profile approach to public relations. When things go smoothly, that is highly effective and, best of all, cheap because it implies a lot of free press coverage. Remember when Consumer Reports said that Tesla's Model S sedan was its top scoring car back in May? Neither did we.

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Karl Brauer, a senior analyst at Kelley Blue Book, puts it succinctly: "For a company with a stock price based as much or more on image than financials, those recurring headlines are highly damaging." Three fires in six weeks, regardless of the cause, certainly gives shareholders something to think about, even if Tesla's target buyers cannot wait to get behind the wheel of their very own cars.

The National Highway Traffic Safety Administration (NHTSA) has been tracking fires in electric vehicles because the agency is concerned that the lithium-ion batteries may be especially prone to catching fire. So far, both previous incidents involving the Model S have been caused by accidents, and no one was hurt in either crash.

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Tesla's stock price was down another 6.5% Thursday to $141.55 in the noon hour, after dropping about 15% Wednesday after failing to dazzle investors with its third-quarter earnings report.

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