Will Tesla Motors Be Forced to Issue a Model S Recall?

Tesla Motors is under fire again; this time after one of the company's Model S cars caught fire while parked. Could a recall be on the table?

Feb 15, 2014 at 12:30PM

Tesla Motors (NASDAQ:TSLA) has skyrocketed in value over the past year because of its award winning Model S. However, the electric-car maker is under fire again after another Model S burst into flames -- this time, while the vehicle was parked. Toronto Fire Services said the fire started in the engine area of a Tesla car in a Toronto parking garage earlier this month, though Canadian officials have not yet confirmed the actual source of the fire.

A spokeswomen for Tesla said, "In this particular case, we don't yet know the precise cause, but have definitively determined that it did not originate in the battery, the charging system, the adapter or the electrical receptacle, as these components were untouched by the fire."

Smoking hot cars
Tesla certainly makes beautiful cars. However, concerns over potential fire risks could hurt the company's reputation for quality and safety. This blaze marks the fifth Model S fire in the last five months. If you remember, these prior incidents sparked a firestorm of negative press for Tesla that led to an investigation in November by the National Highway Traffic Safety Administration.

Tesla

Source: Wiki commons

As more Model S fires have occurred in recent months, Tesla's critics put added pressure on the company to issue recalls addressing the issues. To quell concerns, Tesla released an over-the-air update in January, which gave Model S drivers more control over their cars' air suspension ride height. The software update was Tesla's answer to two fires that broke out after the owners collided with road debris. The company also revamped the charging software in response to a fire that occurred while a Tesla Model S was charging.

A futuristic recall
These so-called "over-the-air updates" are actually working in Tesla's favor because they highlight the sheer convenience of owning a Tesla. Unlike traditional automakers, Tesla is able to deploy modern day recalls that can be achieved by simply updating the car's software remotely. While we'll have to wait to find out the cause of the latest fire, Tesla's ability to fix system glitches in real-time reaffirms Tesla's commitment to quality.

Up to this point, Tesla appears to have curbed investor's worries over car fires, even without issuing a recall in the traditional sense. In fact, it's the stock that' has been on fire recently -- up more than 30% so far in 2014.

Moreover, news of the latest fire comes after a record week for the EV maker. Shares of Tesla zipped ahead this week, climbing as much as 12% to trade near $200 apiece. Fires aside, investors will get more insight into the state of Tesla's business on Monday when the company reports fourth-quarter results. Until then, here are six more reasons to love red hot growth stocks like Tesla today.

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Tamara Rutter owns shares of Tesla Motors. The Motley Fool recommends Tesla Motors. The Motley Fool owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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