Tesla Still Commands Five-Star Safety Rating

12/24/13 11:44AM EST

Tesla Still Commands Five Star Safety Rating Tesla Still Commands Five Star Safety Rating

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The Tesla Motors Inc (NASDAQ:TSLA) Model S is still one of the safest cars on the road according to a release from the NHTSA. The body was investigating the electric vehicle in case it was faulty to the point where it added to a risk of fire in the car. The new release  reiterated the original five star safety rating on the vehicle for 2014. In early trading on Christmas Eve stock in the electric car maker was up by about 10 percent.

Tesla shareholders have been waiting for the results of the report from the National Highway Traffic Safety Administration. A series of media reports about fires in several Tesla Motors Model S units through 2013 lead some to believe that the electric car was defective. At worst a recall was feared, at best the company was to have its spotless brand devalued by the stories.

Tesla NHTSA Report

According to the National Highway Traffic Safety Administration the Model S will retain its five-star rating for 2014, but the body didn’t give any extra information about its review of the Tesla Motors car. The agency is still completing the process by which it will conclude the road-worthiness of the electric car.

That review is the biggest headline risk to Tesla stock. This morning’s release lessened that risk to some extent. There is still a major threat from safety issues with the Model S, however. It is not that the car is in fact dangerous, it’s that the car incorporates a lot of new technology and consumers re going to be skeptical about that technology until they become accustomed to it.

A German review of the safety of the Tesla Model S concluded that the company’s car did not contribute to the fires in any way. Authorities in that country were investigating incidents similar to those that took place in the United States. the German review removed any possibility of a recall in that country. A recall in the United States would have much more devastating effects, however.

Tesla Sares Drive On

Tesla Motors Inc (NASDAQ:TSLA) shares jumped on this morning’s market after the release from the NHTSA. The company’s shares are still trading well below their 2013 highs,  but shareholders have seen wonderful gains since the beginning of 2013. The company’s value is based on almost nothing but potential. If the Model S can retain a perfect safety record, that potential will remain a good deal higher.

Tesla Motors Inc (NASDAQ:TSLA) could be ruined by many forces, but a recall of its vehicles so early in its history would almost certainly ruin the firm. It would allow competitors time to get ahead of the company on the technology front, as well as design and marketing. Tesla Motors looks stronger on Christmas Eve than it did a few weeks ago, but that doesn’t mean it’s a good bet for 2014.

Disclosure: Author represents that he has no position in any stocks mentioned in this article at the time this article was submitted.