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Tesla Shares Drop on Report of Second Model S Fire

Updated from 1:17 p.m. EST to provide company comments in the third paragraph.

NEW YORK ( TheStreet) -- Shares of Tesla Motors (TSLA - Get Report) dropped 3% to $164.55 on Monday, following footage of another Model S fire, this time in Mexico.

The crash reportedly happened Oct. 18 in Merida, a city in the northern Yucatan Peninsula of Mexico. As with the first Model S crash in Washington state, the fire appears to be localized in the front part of the car.

When asked for comment, Tesla was pleased the driver was safe, given the nature of the accident. "We were able to contact the driver quickly and are pleased that he is safe," a Tesla spokeswoman said in an email to TheStreet. This was a significant accident where the car was traveling at such a high speed that it smashed through a concrete wall and then hit a large tree, yet the driver walked away from the car with no permanent injury. He is appreciative of the safety and performance of the car and has asked if we can expedite delivery of his next Model S."

Judging by the video, it appears that the crash of the car was exceptionally severe, and a fire may have also happened to an internal combustion engine.

Fire and safety concerns have been an issue for Tesla, and its high-flying stock, since reports of the first fire were unearthed last month. The safety concerns were in part cause for a downgrade from Merrill Lynch last week. Analyst John Lovallo II questioned Tesla's support from institutional investors for factors such as "the recent Model S battery fire and potential NHTSA probe, and speculation of a slowdown in the company's European expansion," Lovallo wrote in a note.

The first fire caused CEO Elon Musk and the company to issue a post about the safety of the car on the company's official blog, as it relates to a gasoline-powered car.

"Had a conventional gasoline car encountered the same object on the highway, the result could have been far worse," Musk wrote in the post. "A typical gasoline car only has a thin metal sheet protecting the underbody, leaving it vulnerable to destruction of the fuel supply lines or fuel tank, which causes a pool of gasoline to form and often burn the entire car to the ground. In contrast, the combustion energy of our battery pack is only about 10% of the energy contained in a gasoline tank and is divided into 16 modules with firewalls in between. As a consequence, the effective combustion potential is only about 1% that of the fuel in a comparable gasoline sedan."

Since the time of the crash, the National Highway Traffic Safety Administration has decided that it won't probe the first Model S fire from earlier this month.
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