BMW is in the process of recalling hundreds of thousands of vehicles at risk of catching fire and has joined the list of automakers like Tesla that recently had safety issues. The German carmaker issued a recall for 917,106 vehicles that covers models from various model years. According to a posting on the National Highway Traffic Safety Administration website, the recall is to correct a potential electrical short that could possibly create a fire risk.
Share of BMW (ticker: BMW.Germany) rose 7% in overseas trading. Just like Tesla’s (ticker: TSLA) stock, the reaction of BMW stock didn’t vary greatly following the recall, a sign of the market’s relative trust in the brand’s ability to solve the problem quickly and at a reasonable cost.
In the company’s case, investors have chosen to shrug off the recall and are instead paying attention to the broader market. The S&P 500 and Dow Jones Industrial Average rose roughly 2.1% and 1.8%, respectively, including midday trading. Germany’s DAX Index gained 7.4%.
BMW has recalled about 919,000 cars in the U.S so far, with most of the cars expected to require a trip to the repair shop. In comparison, Tesla has recalled roughly 1.5 million vehicles in the U.S this year alone, although the majority of its recalls have been fixed with a software update.
Shares of Tesla rose 3.3% in midday trading, a gain in tandem with the rest of the market. It is expected that investors will keep a close eye on recalls until they’ve established an industry baseline. These days recalls don’t make the headlines like they used to because companies like Tesla have demonstrated more and more that some issues can be fixed with a software update, which is inexpensive for the company both in terms of hard cash and brand equity.