A day after Tesla (NASDAQ: TSLA) was hit with a massive vehicle recall related to its driver-assist software, investors are still trying to make sense of what the government’s inquiry will mean for the business. There doesn’t seem to be any clear consensus, with Tesla shares trading in a range of up 2% to down 2% on Friday morning.
A long-simmering government investigation into Tesla’s Autopilot self-driving technology hit a boil Thursday when the National Highway Traffic Safety Administration (NHTSA) published a voluntary recall of more than 350,000 Tesla vehicles. The government said that Tesla’s self-driving software package “may allow the vehicle to act unsafe around intersections” or exceed posted speed limits.
Tesla has an over-the-air software fix that it says will remedy the problem, though the NHTSA will continue to monitor and is continuing its broader probe into Autopilot. The potential fix, and the ongoing uncertainty, are making it difficult for some investors to judge how serious an issue the recall is.
There’s even a question about calling it a recall. CEO Elon Musk on Twitter said that using the word “recall” for an over-the-air software update “is anachronistic and just flat wrong.”
Tesla investors have other things to monitor as well. On Friday, The Wall Street Journal reported that the company is facing growing pressure in China from BYD, the country’s top electric vehicle producer. BYD has a number of key advantages over Tesla, according to the report, including in-house battery and semiconductor manufacturing capabilities that can feed vehicle production. BYD also sells vehicles at far lower prices than Tesla.
Recall or not, the government investigation into Autopilot is something investors need to take seriously. The company has invested significantly to make its driver-assist systems a differentiator. Musk, in a 2022 interview, called full self-driving “the difference between Tesla being worth a lot of money or worth basically zero.”
That’s likely hyperbole, as Tesla has strong brand loyalty and new products including the Cybertruck to fuel future demand. But without question, Autopilot has been a key part of the Tesla bull case for years.
Until the government investigation is complete, investors should expect talk of recalls and the broader debate over the safety of advanced driver-assist systems to contribute to volatility in Tesla shares.
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