Tesla Continues to Spin out of Control: What Investors Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis. 

Tesla Motors can't seem to stay out of the news these days. Negative press related to a number of recent car fires pushed Tesla's stock to a low of $119.22 in early trading on Tuesday. However, Tesla reversed that loss later in the day as shares gained 6.1% to trade around $129. Let's take a closer look at what's to blame for the stock's sudden volatility.

Today's move comes after the National Highway Traffic Safety Administration, or NHTSA, opened a formal investigation into two recent Model S fires. The federal agency said it hopes to flush out "potential risks associated with the undercarriage strikes." In each of the recent incidents, the Model S caught fire after hitting road debris that punctured the underbelly of the cars. The drivers involved in these separate incidents were able to safely exit their cars thanks to Tesla's onboard safety system, which is installed in all Model S vehicles.

The government probe raises questions about the safety of Tesla's cars, which could put a dent in the company's stock.

The Model S was awarded the highest safety rating of any car ever tested by the NHTSA earlier this year. And the electric-vehicle maker's outspoken CEO hasn't been shy about voicing his thoughts on the matter. On his Twitter account this afternoon, Elon Musk tweeted: "What makes this incredibly unjust is that the Model S to date has the best safety record of any car on the road (no injuries or deaths ever)."

Now it will be up to investigators to decide whether Tesla will need to take additional steps to improve the fire safety of its vehicles. With more than 13,000 Model S cars sold in the U.S. this year, a potential recall would be a serious headwind for the stock.

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The article Tesla Continues to Spin out of Control: What Investors Need to Know originally appeared on Fool.com.

Fool contributor Tamara Rutter owns shares of Tesla Motors. The Motley Fool recommends Tesla Motors. The Motley Fool owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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