For an automaker, it is obviously never good news if its
vehicles catch fire. As for
Tesla Motors, Inc.
), the company had to deal with three incidents in five weeks of
its Model S electric car catching fire. However, now Model S'
battery cell maker Panasonic has come to support the automaker
and said that both Tesla and Panasonic maintain high safety
Panasonic's statement makes sense as it was the battery
compartment that caused the latest fire. The latest incident
occurred last Wednesday afternoon near Smyrna, TN, after a Model
S car hit road debris. The collision led to fire in the front
portion of the vehicle. However, the passenger compartment was
secured. Model S is equipped with a relatively new technology in
the auto industry, i.e. lithium-ion batteries, which is more
powerful than the lead-acid batteries, though more risk prone.
The battery pack of Model S is placed under the passenger
compartment. A quarter-inch-thick metal shield safeguards the
battery. The debris pierced that shield and damaged the battery.
As a result of this fire, shares of Tesla had dropped 7.5% to
$139.77 on Nov 7, reflecting investors' concerns over such
repeated incidents that are denting the brand image. The drop in
share price was close on the heels of a 14.5% decline to $151.46
on Nov 6 due to disappointing third quarter results, arising from
The company is facing a shortage of lithium-ion battery cells,
which is limiting its production capacity. Thus, Tesla is unable
to meet the rising demand for its Model S.
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Tesla has increased its production capacity to 550 cars per week
and has delivered more than 5,500 cars during the third quarter.
The automaker has also expanded its supplier agreement with
Panasonic, whereby the latter will supply around 2 billion
automotive grade lithium-ion battery cells to Tesla over the next
four years. This is enough to produce around 300,000 cars. The
company is also considering opening a cell and battery giga
factory to boost cell production.
Tesla currently retains a Zacks Rank #3 (Hold). Other major
automobile stocks worth considering are
Fox Factory Holding Corp.
General Motors Co.
Ford Motor Co.
). While Ford is a Zacks Rank #1 (Strong Buy) stock, the other
two carry a Zacks Rank #2 (Buy).