Tesla has already recalled more than a million cars this year. Whether you consider it serious, or even significant, depends on whether you’rebearish or bullishon the stock—or just confused.
For the bears, the recalls showqualityis slipping as the electric-vehicle pioneer grows faster and faster.
The bulls, on the other hand, are far less worried because no crashes have been reported because of the problems, and all the problems been fixed without a single trip to the shop—both proof thatTeslahas revolutionized the auto industry, for the better.
And there are more than a few investors who are simply finding it tough to cut through thebull-bearnoise. They need more context.
First, the scope of the recalls: Since January, Tesla (ticker: TSLA) has issued four recalls for almost 1.5 million vehicles, according tothe National Highway Traffic Safety Administration. That’s roughly four times the 360,000 cars that Tesla delivered in the U.S. in 2021, and a half-million more, at least, than the 936,000 delivered worldwide. Global deliveries rose about 87%, compared with 2020.
Those productions numbers are what the bears point to when making their case. But here’s the rub: context. Since the start of 2020, Tesla has recalled about 2.1 million vehicles andFord Motor(F) has recalled about 10.5 million vehicles—fives times as many.
Now, also consider the number of recalls issued by Tesla and Ford for the past two years: Tesla’s 19 vs. Ford’s 100. Ford is recalling more cars more frequently than Tesla. Again, though, context: Ford is larger than Tesla and sells more cars in the U.S.
So adjusted for the number of cars sold in 2021, to try to account for auto maker size, Tesla recall numbers don’t look as good, relative to the industry.
But numbers alone can’t tell the entire story. Recall severity matters, too. An example: More than 42 million cars from 19 auto makers were recalled over faulty air bags manufactured by Takata, a Japanese auto supplier. That defect caused more than a dozen deaths and hundreds of injuries, andeventually bankruptedTakata.
Tesla’s 2022 recalls haven’t resulted in any crashes—at least none have been reported. And all the malfunctions have been corrected with software updates, which makes the fixes fast and cheap, relatively speaking.
Other auto makers are forthright about trying to copy Tesla’s ability to sell software-based services across its installed base of vehicles.
“We really didn’t have full modems in the vehicles until full year sort of 2020-ish,” said Ted Cannis, CEO of Ford’s Pro business, at a November investor conference. “Now we have this capability that we can add these higher-margin software sales [and] annual subscriptions.”
The industry pivot toward software means investors will hear more about recalls in coming months. The raw numbers might be large, but vehicle safety and repair cost will have the bigger impact on stock prices.
Tesla stock has been at the mercy of broader market forces so far this year, not recalls. On Tuesday, for example, shares were down 5.8% in afternoon trading on investor concerns about the Russia-Ukraine crisis. TheS&P 500andDow Jones Industrial Averageare down 1.2% and 1.5%, respectively.
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