Cars are changing. Software is controlling more and more features and functions. That means investors will have to get used to more, larger recalls.
Reuters, and other outlets, reported that Chinese auto regulators have announced that
Tesla
(ticker: TSLA) is recalling about 1 million vehicles to fix a braking issue.
Tesla
didn’t respond to a request for comment about the recall.
The problem will be fixed with a software update. The update will restore the ability to turn off regenerative braking and give a warning when drivers step on the accelerator hard.
Regenerative braking in an EV uses the electric motor to slow down the car. The process feeds energy back into the batteries, extending vehicle range. Most, if not all, EVs use regenerative braking.
The recall is a large number, but the stock probably won’t do much based on that.
Recalls that require cars to go into the shop to replace a part tend to cost more than issues fixed with a software update.
Recalls are also a part of the normal course of business in the auto industry. In the U.S., top auto makers have recalled some 7 million vehicles, in more than 100 separate actions, so far in 2023. Tesla has had five recalls affecting almost 400,000 vehicles.
Ford Motor
(F) has announced the most recalls so far in 2023: 21 recalls impacting about 2.2 million units.
Most of the vehicles involved in Ford’s recalls need to visit to the dealer. Three of Tesla’s five recalls involve physical service too, but those three amount to less than 4,000 of the total number of vehicles recalled. Tesla’s largest U.S. recall this year involved about 360,000 vehicles running new versions of Tesla’s Full Self Driving driver assistance software. The software patch updated how cars would travel through intersections.
Most recalls simply do not impact stock prices. Warranty expenses are a part of every auto maker’s profit and loss statement. They only start to matter when costs stretch into the billions, which is rare, or the safety issues corrected can be tied to many accidents. Don’t forget, most recalls are preventative in nature and the recall process starts after some drivers experience an issue.
The key for investors is to track, but not react to, every recall notice.
Tesla stock isn’t being impacted to Friday’s recall news. Shares are up about 1% in premarket trading.
S&P 500
and
Nasdaq Composite
futures are up about 0.4% and 0.2%, respectively.
Investors are more focused on a Thursday tweet from CEO Elon Musk. He says he has found a new CEO for Twitter. That’s a relief for Tesla investors that have worried he is spending too much time at his social media platform.
Write to Al Root at [email protected]
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