Tesla is recalling around 135,000 Model S luxury sedans and Model X sport-utility vehicles “over touch-screen failures,” WSJ reports.
Why It Matters: It’s one of the electric-vehicle company’s biggest safety actions ever and comes after the National High Traffic Safety Administration made the request last month. Tesla disagreed that the issue “constituted a defect in the vehicle,” but chose to comply, end the investigation and improve the customer experience.
- Regulators have said the touch-screen issue can take around five to six years to manifest. Over-the-air updates have failed to remedy the problem.
Numbers To Consider:
- The NHTSA said the problem affected roughly 158,000 vehicles.
- Tesla delivered around 500,000 vehicles worldwide last year, with close to 40% in the U.S.
- The EV maker also recalled roughly 123,000 Model S cars in 2018 over a finding that “some bolts corroded in cold weather, which could lead to power-steering failures.”
Tesla’s Financial Footing: It’s an action Tesla can no doubt stomach. The company has reported six profitable quarters consecutively, and its cash holdings landed close to $20 billion at the end of last year.
- Tesla had a market cap of $796 billion on Monday, which is larger than the next nine largest automakers combined.
The Takeaway: The recall comes at a tricky time for the auto industry — a computer chip shortage has messed up global production. Therefore, Tesla, which said it would replace the hardware for free, has to do it in phases.
Tesla ($TSLA) stock has shrugged off this news and is up on the day and flat during the month of January.
Tesla is known for not having the best manufacturing or assembly quality, which makes sense because they are a software company in their DNA. For example, in the new Model S lineup, knowing their cars mechanically don’t keep out road noise as well as the established manufacturers, they instead are pumping in noise-cancelling anti-noise to quiet the interior.
Having been a relatively long-time Tesla owner myself, their customer service has always been great in my region and they’ve fixed any issue I had for free and pleasantly. I would hope they keep up this great customer service to compensate for quality disadvantages even as they grow massively.
One lesson to draw, though, is that I believe it is very hard for a company to be both an amazing hardware and software company… most are one or the other. Apple ($AAPL) is a hardware company at heart, which is why they are lagging in the software game. Google ($GOOG) is a software company, which is why they sometimes struggle with selling their devices. Microsoft ($MSFT) and Amazon ($AMZN) seem to do a little better at being good at both, although I would argue that they do so because they pick their battles carefully.