Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

Shares of Tesla Motors, Inc. (TSLA - Analyst Report) dropped 2.2% to $137.36 on Dec 6, after two class action lawsuits were declared against the automaker. Two law firms – Pomerantz Grossman Hufford Dahlstrom & Gross LLP and Brower Piven, A Professional Corporation – filed class action lawsuits on behalf of investors who purchased the stock between May 10 and Nov 6 this year.

The lawsuits accuse Tesla of making misleading statements regarding the safety of Model S, including puncture and fire risks in the car’s undercarriage and lithium ion battery pack. Moreover, the lawsuits claim that defects in the car led to the battery pack catching fire in specific situations. They also allege that the defects may affect the future sales and share price of Tesla. The lawsuits also hold Tesla accountable for failing to deliver enough cars to offset its fall in revenues from other sources.

Similar class action lawsuits were started last month against Tesla by Glancy Binkow & Goldberg LLP, Robbins Geller Rudman & Dowd LLP and Morgan & Morgan. Law Offices of Howard G. Smith is also undertaking investigations related to the matter.

The lawsuits are the result of recent fire incidents in three Model S cars. In early October, the first Model S electric vehicle caught fire near Seattle, U.S. This mishap was soon followed by a fire in another Model S car in Merida, Mexico. The third Model S vehicle reportedly caught fire on Nov 7, 2013 near Smyrna, Tenn., after the vehicle hit road debris. The collision led to fire in the front portion of the vehicle.

The National Highway Traffic Safety Administration (NHTSA) has also started an investigation to uncover any safety defect in Model S. Last week, the auto regulator asked for various relevant details from Tesla in relation to the investigation, including consumer grievances and property damage claims.

The automaker has also been asked to submit details regarding any design alteration and engineering drawings of Model S to the U.S. auto regulator. The NHTSA also demanded details of the after-effect of damage in the battery pack of Model S and the method adopted by Tesla to solve those problems.

Recently, German Federal Motor Transport Authority or Kraftfahrt-Bundesamt (KBA) revealed that it did not find any manufacturing defect in Tesla’s Model S. The authority’s statement came after it examined and reviewed the vehicle following the recent fires. The German authority issued a letter stating that Tesla does not need to take any further measures for safety under the German Product Safety Act.

Kraftfahrt-Bundesamt plays a similar role in Germany like the NHTSA in the U.S. It has the power to recall any vehicles in case of any detected defect.

Tesla designs and manufactures electric vehicles and electric vehicle powertrain components for partners including Toyota Motor Corp. (TM - Analyst Report). The company currently has a Zacks Rank #3 (Hold).

Better-ranked automobile stocks include Honda Motor Co., Ltd. (HMC - Analyst Report) and Ford Motor Co. (F - Analyst Report). Both carry a Zacks Rank #2 (Buy).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
VERTEX ENERG VTNR 8.25 +10.59%
MODINE MANUF MOD 17.12 +8.77%
CLAYTON WILL CWEI 140.03 +7.27%
E*TRADE FINA ETFC 22.67 +5.44%
KNIGHTSBRIDG VLCCF 13.22 +5.42%