Written by Brenda Nakalema

Tesla recall. What investors should watch for.

Tesla is recalling more of its cars, explaining that the problems will be fixed with the latest software update. This …

Tesla is recalling more of its cars, explaining that the problems will be fixed with the latest software update. This alone spells good news for the company as it would mean the cars won’t have to go into the shop- a costly affair, both in cash and brand equity.

Despite this, it’s the third time the company’s recalling its cars within a period of a few weeks, which seems like a cause for concern for investors. Most investors are stuck wondering what they are to do with the recall, and the answer appears to be nothing at all. Investors should simply watch and pay attention to the recall data. They should also attempt to get a better sense of the overall vehicle quality. The vehicle quality alone can move the market share and stocks in the long run.

Tesla (ticker: TSLA) is recalling 26,681 more vehicles in order to correct an error with the heat pump related to windshield defrosting. The solution lies in a software update that Tesla will deliver over the air. Details are listed on the National Highway Traffic Safety Administration website or NHTSA.

The company’s stock is yet to react to this latest bit of news; shares were up 1.8% in premarket trading Wednesday. S&P500 and Dow Jones Industrial Average futures jumped 0.7% and 0.5%, respectively. Whether recalls affect stocks or not should not be of much concern at the moment, the bigger issue lies in the quality of the vehicles. Holistic product quality can be difficult to discern from only recall notices.

J.D Power, an Auto industry data provider, conducts a widely followed and respected initial quality survey which could be a useful resource for investors. The survey asks car owners to list the problems they experience within the first 90 days of vehicle ownership. Last year, Tesla owners reported 2.3 problems per vehicle- the industry average is set at 1.6 problems per vehicle. On average, luxury brands tend to have more problems than standard vehicles.

Tesla’s 2.3 problems are comparable to Audi’s 2.4 and 1.7 for both Cadillac and BMW.

Tesla showed only a little improvement from 2020 to 2021, and for this reason, it would be smart for investors to track the level of initial quality for any automaker and the industry as the cars are made smarter with more features enabled by repeated software updates.