Tesla, under US scrutiny, tries to avert recall with Model S tweaks image

As auto safety regulators have launched an investigation into Tesla’s Model S sedan after three car fires in six weeks, Tesla jumped the gun and announced it is raising the vehicle’s ground clearance.

The electric carmaker is seeking to head off a months-long investigation that could lead to expensive upgrades and longer-term damage to the image of electric cars. Late on Monday, Tesla said it would push out a software update to the Model S air suspension that will give the car more ground clearance at highway speeds, and will amend its warranty policy to cover fire damage even if it is due to driver error.

Tesla shares fell in premarket trading on Tuesday following the news but they were up 3.5 percent in early-afternoon dealings. The U.S. National Highway Traffic Safety Administration has opened a preliminary evaluation of the risks associated with highway debris striking the underbody of the 2013 Model S, the agency said on its website on Tuesday.

The probe comes after a wave of bad publicity for Tesla – not only the fires, but an accident at its Fremont, California, factory that burned three workers; results and forecasts from the company earlier this month that disappointed investors; and even a complaint from actor George Clooney about being stuck on the side of the road in a Tesla Roadster sports car. Tesla’s share price has dropped by more than a third since the end of September, wiping some $8 billion off the company’s market value.

Musk yesterday framed the safety questions surrounding the Model S as a threat to “delay the advent of sustainable transport and increase the risk of global climate change, with potentially disastrous consequences worldwide.”

The U.S. investigators who will decide whether to allow Musk to head off a recall on his terms are with the same agency that rebuked the company two months ago for exaggerating the Model S’s government crash-test results.

A preliminary evaluation by NHTSA can lead to a recall. The investigation, which the agency started last Friday, focuses on two Model S fires that happened after the vehicles ran over debris on U.S. highways.

Via Reuters/Bloomberg