The fire began in the car's battery after the driver hit metal debris. Firefighters extinguished the flames and no one was hurt.
Tesla says it's the first fire in one of its cars. Experts say electric car fires are rare, and consumers should still consider buying them.
But the sight of flames engulfing the front end of a Model S on the side of a highway in the Seattle-area has been a jolt to investors. Tesla has been a Wall Street darling this year, selling more cars than expected and posting its first-ever profit.
Shares fell 6 percent Wednesday as video of the fire surfaced. The shares were down $8.75, or 4.8 percent, to $172.20 in afternoon trading Thursday. At that price, Tesla's market value has dropped about $2.5 billion in the past two days.
Still, if an investor purchased a share of Tesla at $35 on Jan. 2, they're sitting on a gain of more than 400 percent for the year.
Deutsche Bank analyst Rod Lache told investors Thursday that he views the fire as an isolated incident and still expects Tesla shares to reach $200.
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