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Why Tesla Stock Popped After Christmas

By Rich Smith – Dec 27, 2021 at 5:51AM

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NHTSA dispute: Solved.

What happened

It wasn't exactly a "Christmas miracle." In fact, I'd go so far as to say it was pretty obvious. But whether you call it a miracle or inevitable, Tesla (TSLA 0.73%) just solved its NHTSA problem -- and now its stock is going up, rising 3.7% as of 10:25 a.m. EST Monday.

So what

Last week, Tesla stock got dinged after The New York Times reported that the National Highway Traffic Safety Administration (NHTSA) was looking into potential risks in the company's software -- specifically, whether allowing drivers to play video games on their central infotainment systems while cars were in motion constituted "design defects posing unreasonable risks to safety."

Old style arcade game screen with a red and a blue car on a race track and a HI SCORE shown.

Image source: Getty Images.

Had NHTSA concluded in the affirmative, the agency could have ordered Tesla to halt sales of its electric cars in the U.S. until the "design defect" was remedied.

Tesla didn't want that to happen, of course, so instead, it made the obvious choice and deactivated the function. As Reuters reports, Tesla informed the NHTSA of its decision last week, and the agency confirmed the news on Thursday.  

Now what

Removing the "Passenger Play" functionality from Tesla cars may make Teslas moderately less attractive to the handful of drivers lacking common sense sufficient to know they shouldn't be playing Missile Command while driving. For the vast majority of car buyers, however, the company's decision will fall into the category of: "Well, of course they turned that off. Why was it on there in the first place?!" 

The bigger significance of this news, I suspect, is that Tesla's solution to its NHTSA kerfuffle highlights the company's ability to instantly improve its cars' functionality through over-the-air software updates. Long term, I see that as a positive for the stock -- not a negative.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns and recommends Tesla. The Motley Fool has a disclosure policy.

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