TSLA Stock Alert: Why Tesla Just Recalled Another 435,000 EVs

Shares of Tesla (NASDAQ:TSLA) are slightly up today amid reports the electric vehicle (EV) maker is recalling an additional 435,000 of its cars, the latest in a string of safety problems.

The recall, which is getting a lot of attention on social media, involves Tesla electric vehicles sold in China. The Austin, Texas-based company led by Elon Musk said it will issue software updates to fix a rear light issue. The recall of more than 400,000 vehicles comes after Tesla was pressured by China’s State Administration for Market Regulation to fix the light problem.

TSLA stock is down 51% this year and currently trading at about $198 per share.

What Happened With TSLA Stock

Tesla said it is recalling a total of 142,277 Model 3 electric sedans and 292,855 Model Y mid-size sport utility vehicles (SUVs) to fix a software problem that prevents the rear lights from illuminating. China’s road safety regulator determined the light issue poses a safety hazard for drivers in the nation.

In a written statement, Tesla said it plans to issue software updates remotely to fix the rear light illumination problem. This is the latest in a series of technical glitches and recalls impacting Tesla vehicles that are sold into the Chinese market. The company just last week announced a recall of about 80,000 cars in China due to a seatbelt issue.

Why It Matters

China is a strategically important market for Tesla. The company operates a major manufacturing facility outside of Shanghai and has sold a record number of electric vehicles in China. At the same time, Tesla faces growing competition within China from domestic electric vehicle makers such as Nio (NYSE:NIO) and Li Auto (NASDAQ:LI). Those Chinese rivals continue to report strong sales figures.

To keep a competitive edge in China, Tesla in October lowered the prices on its Model 3 and Model Y vehicles after raising them earlier in the year. Beyond China, safety issues continue to cause problems for Tesla and its growth. The company last month recalled more than 321,000 vehicles in the U.S. over a similar rear light issue to the one reported in China.

Tesla vehicles frequently top lists for safety issues and problems. Consumers have reported receiving Tesla vehicles from the manufacturer without the seats bolted into place and with faulty navigation systems, among other problems. Ongoing safety problems also come as investors fret that company CEO Elon Musk is distracted by his recent $44 billion acquisition of Twitter and not focused on growing and improving Tesla.

What’s Next for TSLA Stock

TSLA stock is up nearly 2% to start the trading day, but it could slump as investors and analysts digest the latest safety recall in China. With the company’s share price cut in half this year, the latest problems are unlikely to help the stock. Investors may want to wait for some positive news out of Tesla before purchasing shares.

On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.

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