Tesla in hot water after its car catches on fire

Marcelo Jaramillo, assistant store manager, (2nd R) shows a Tesla motor company car in a dealership at the Dadeland Mall on June 6, 2013 in Miami, Fla.

Shares of Tesla, the electric car company, fell by more than six percent yesterday, after a Tesla Model S caught fire in Washington State, and a video of that went viral. The car is at an intersection, and smoke is pouring out. There are bright orange flames.

“Wow, I can feel the heat in here,” a passerby says. “Oh, that’s a Tesla, dude!”

Electric or not, about 300,000 cars catch fire each year.

"Because the lithium-ion battery is new technology, it is going to get more attention when there is a vehicle fire than if it were old technology," says Andrea James, an analyst with Dougherty & Company.

According to Tesla, this fire started because the driver hit a piece of metal on the road. That debris damaged the car’s battery pack.

Electric vehicles won’t catch on until car makers can do two things. They need to make batteries that are both inexpensive and can go far enough to allay what Ben Kallo calls drivers’ 'range anxiety.'

Kallo, an analyst with R.W. Baird & Co., says that the YouTube vehicle may also create some anxiety:

“This could slow some people down that were thinking about purchasing the vehicle.”

Even though the car has earned a five-star safety rating.

About the author

David Gura is a reporter for Marketplace, based in the Washington, D.C. bureau.

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