Cargo Ship Carrying Thousands of Luxury Cars Sinks in the Atlantic

The Panama-flagged 60,000-ton merchant ship carrying around 4,000 luxury cars—including models from Porsche, Bentley, Audi, Lamborghini and other Volkswagen AG brands—caught fire in February and burned intensely for days.

SMIT Salvage, the Dutch company charged with salvaging the ship, sent a team of large oceangoing tugboats to the scene and was towing the vessel to safety when it sank.

Salvage crews and the Portuguese navy had said that the intensity of the fire might be explained by a large number of electric vehicles on board. Some batteries are known to be flammable and burn at high temperature when they combust, making such a blaze hard to extinguish.

The Felicity Ace fire is one of the first on board a major vehicle carrier loaded with a substantial cargo of electric vehicles. The incident has sparked debate among insurers and regulators about how to safely transport such vehicles, a question that will gain urgency as EVs become more widespread.

While the cause of the fire on the Felicity Ace might never be known because the ship is lying at the bottom of the ocean, experts say there is a danger that batteries in electric cars can short circuit and catch fire. That could mean that precautions not relevant for conventional vehicles might have to be taken into account during transport, regulators said.

After the blaze stopped, Volkswagen had said it expected “that large parts of the nearly 4,000 vehicles from several group brands were so damaged in the ship fire that they can no longer be delivered.”

Volkswagen declined to comment on the value of the cargo.

Incident insurance experts Russell Group Ltd. estimated that the cargo on board the Felicity Ace was worth about $438 million, of which the cars on board accounted for about $401 million. Russell estimated that VW could face losses of at least $155 million.

Write to William Boston at [email protected]