What happened
After dropping steeply in the early morning, and recovering in the late morning, Tesla (TSLA +0.70%) stock is down again -- 2.2% as of 1:35 p.m. ET.
And by this point, you probably won't be too surprised to hear what the headlines say: Tesla just issued another recall.
Image source: Getty Images.
So what
As Reuters reported this morning, the National Highway Traffic Safety Administration (NHTSA) wants Tesla to fix 578,607 Model S, 3, X, and Y electric cars and SUVs that employ a "Boombox" feature that enables Tesla vehicles to blast music through external speakers while the car is in motion, drowning out a "Pedestrian Warning System" sound that the cars are required to be equipped with.
As with past recalls (Reuters observes that the NHTSA has required Tesla to make 10 fixes in the last four months, including four in just the last couple of weeks), Tesla intends to fix the issue with an over-the-air (OTA) software update. In contrast to recent recall events, however, investors don't seem to be accepting that this is good news for Tesla, highlighting the company's ability to fix defects with simple software patches that cost basically nothing.
Instead, investors are asking the obvious question: Why is Tesla having so many recalls in the first place, and does this indicate a problem with quality control that should be concerning?
Now what
Adding to investor worry today is the fact that Elon Musk, Tesla's CEO, tweeted out a kind of "wea culpa" yesterday afternoon, admitting that Tesla "dropped the ball badly regarding new Model X production ramp & still haven't fully recovered."
We dropped the ball badly regarding new Model X production ramp & still haven't fully recovered. Was idiotic to stop production of old X in Dec 2020 when there was still plenty of demand!
-- Elon Musk (@elonmusk) February 9, 2022
The CEO's observation that it "was idiotic [of Tesla] to stop production of old X in Dec 2020 when there was still plenty of demand" further worried investors, the implication apparently being that with no old-model X vehicles to sell, and new model X vehicles in short supply, the company won't be selling very many of one of its highest-sticker-priced model, with the result that product mix will skew toward lower revenue this quarter.
All that being said, let's not forget: Even with old model X out of production last year, Tesla still managed to move $54.8 billion worth of metal in 2021, growing its sales 71%, and growing net profits 665%.
Suffice it to say, if Model X is a problem, it seems to be a small one -- and I suspect Tesla will survive this hiccup just fine.
