- REUTERS/Noah Berger
- Tesla is recalling 123,000 Model S sedans to fix a steering-wheel problem.
- But the markets have not taken the news and used it as fodder for a continuing Tesla sell-off.
- As Tesla increases production, more recalls are likely.
Tesla announced on Thursday that it was voluntarily recalling 123,000 of its Model S vehicles because corrosion under limited circumstances in cold weather could cause the power-steering assembly to fail.
The recall comes at a time when Tesla’s stock has been getting hammered down from previous highs. But the recall didn’t seem to add more negativity to sentiment as investors bid Tesla shares back up on Friday.
Tesla has actually been quite proactive about recalls, typically issuing them when there’s limited evidence of dangerous incidence. The company usually says that it’s exercising an abundance of caution. This recall, Tesla’s largest so far, affects Model S production up to 2016.
It’s worth noting that because Tesla has on balance built a relatively small number of vehicles – it just crossed a 100,000 annual threshold last year – and because it sells just three cars, its recalls are going to have a disproportionate effect. If a key component goes out, chances are it was used in most of the vehicles Tesla built during a given period.
Recalls are business as usual
Recalls in the auto industry happen all the time. Sometimes they’re extremely serious, such as the Takata exploding-airbag recall or GM’s ignition-switch scandal. More often they’re run of the mill: A window seal will leak or a connection will fail, which leads to annoyance rather than menace. A trip to the dealership takes care of everything. Automobiles are complicated machines, composed of thousands of components.
Tesla’s recalls are more intense because the company doesn’t stall on doing them, they attract outsized media scrutiny, and, more important, they stress Tesla’s service network, which continues to be a work in progress. They also consume financial resources at a time when Tesla is losing billions. They don’t, however, appear to affect goodwill toward the brand; if anything, they enhance it because Tesla makes such a serious effort to fix the problems.
Giving the carmaker the benefit of the doubt that it will resolve its production difficulties with its new mass-market Model 3 sedan and its ambitious targets for later in 2018, we should get ready to see many more Teslas on the road. And as a result we should get used to more frequent Tesla recalls.
That doesn’t mean Tesla makes bad cars. It just means that the company is becoming like other carmakers as it increases its manufacturing scale.