(Updates with share trading in the sixth paragraph.)
March 28 (Bloomberg) -- Tesla Motors Inc. said it will add battery shields underneath its Model S electric-powered sedans as U.S. regulators ended a four-month investigation into fires that occurred after the cars struck road debris.
The National Highway Traffic Safety Administration said “a defect trend has not been identified” and that Tesla’s fixes should be enough to reduce the fire risk. Tesla began installing a “triple underbody shield,” including a titanium plate, on cars made as of March 6 and will retrofit existing cars, Chief Executive Officer Elon Musk said today in a blog post.
Tesla lost more than a quarter of its market value in November after reports of a third fire in five weeks in which the undercarriage of the Model S struck an object on the road. This week’s decision by regulators lets Palo Alto, California- based Tesla avoid a formal recall and gives Musk more room to focus on expanding sales of the Model S and preparing for the introduction of his more affordable “Gen III” vehicle.
“With a track record of zero deaths or serious, permanent injuries since our vehicles went into production six years ago, there is no safer car on the road than a Tesla,” Musk said. “The addition of the underbody shields simply takes it a step further.”
There are now more than 25,000 Model S sedans on the road, according to the company. The car has retail prices ranging from $70,000 to more than $100,000, depending on options.
Tesla shares, which have risen more than fivefold in the past year, climbed 2.4 percent to $212.37 at 4 p.m. in New York.
NHTSA opened its investigation on Nov. 19, saying it would examine fire risks when the car’s undercarriage strikes objects. One fire erupted in Tennessee after its owner said he ran over a trailer hitch in the roadway at 70 miles (113 kilometers) per hour. Intense fires captured in homemade videos showed the vehicle engulfed in flames. The circumstances resembled an Oct. 1 Washington state incident in which a car struck a piece of metal.
In both cases, the cars’ battery packs, which lay flat at the bottom of their chassis, were punctured. No one was hurt in the crashes that triggered fires.
Another fire occurred in Mexico after a crash that was reported Oct. 18.
On the day NHTSA opened its investigation, the company offered a software upgrade so the car doesn’t ride as low to the ground at highway speeds.
NHTSA closed its investigation March 26, and said in a notice on its website that Tesla’s revision of vehicle ride height and the added shield “should reduce both the frequency of underbody strikes and the resultant fire risk.” It also cited Tesla data that Model S cars have traveled about 90 million miles without incident since the last fire.
The agency said it reserves the right to take further action “if warranted by new circumstances.”
In a defect investigation, officials look at the frequency of incidents compared with other vehicles, whether they occurred under predictable road conditions, and whether there were unusual numbers of fatalities or injuries.
Musk, in his posting, defended the Model S’s safety record, saying a company analysis showed the sedan is five times less likely to have a fire than a gasoline-powered car. Still, Tesla offered a software upgrade so the car doesn’t ride as low to the ground at highway speeds.
The fix should allow Tesla to move past the dramatic incidents last year and put to rest any lingering questions among Model S owners, said Karl Brauer, a senior analyst at automotive research company Kelley Blue Book. Musk never conceded there was a safety-related defect, while NHTSA probably demanded something in return for closing its investigation, he said.
“NHTSA wanted something to satisfy its sense of protecting the consumer,” Brauer said. Musk “was able to come up with a solution that worked for them.”
The agency has investigated fires in two other electric vehicles: General Motors Co.’s hybrid-electric Chevrolet Volt and Fisker Automotive Inc.’s Karma plug-in. The Karma was recalled and GM voluntarily reinforced the battery packs on the Volt after one caught fire following a NHTSA crash-test.
Fires in gasoline-powered cars have led to some of NHTSA’s biggest defect investigations. Earlier this year, the agency and Chrysler Group LLC clashed over fixing 2.7 million Jeep Grand Cherokees for gasoline tanks that can leak in a crash. The agency says 51 people have died in post-crash fires.