This year so far, Tesla had already recalled over a million cars, which could be considered severe or not depending on an investor’s love for the brand, bearish or bullish being the two options. For the bears, the recalls are a clear indication that quality is dropping as a result of the company growing faster and faster.
On the other hand, the bullish investors are way less worried because no actual crashes involving the cars have been reported, and all the problems have seemingly been fixed without a single trip to the shop- tangible proof that Tesla has revolutionized the auto industry.
In the third category are the investors that find it hard to cut through the noise made by both bears and bulls. These investors seem to be undecided on their thoughts regarding the company and instead need more information before they can make any real decisions.
For those still undecided investors, the first step is to analyze the scope of recalls:
Since January, according to the National Highway Traffic Safety Administration, Tesla (ticker: TSLA) has issued a total of four recalls for roughly 1.5 million vehicles. That’s almost four times the 360,000 cars Tesla delivered in the U.S in 2021, and more than half a million more than the 936,00 delivered worldwide. On the other hand, global deliveries grew about 87% compared to 2020.
The productions numbers are the red flags bears point to when stating their arguments. But for more context: Since the beginning of 2020, Tesla has recalled roughly 2.1 million vehicles, while Ford (ticker: F) has recalled about 10.5 million vehicles- five times more.
For even deeper insight, consider the number of recalls issued by Tesla and Ford over the previous two years: Tesla’s 19 compared to Ford’s 100. Ford is recalling more cars more frequently than Tesla. But then again, Ford is larger than Tesla and sells more cars in the U.S.
With this in mind, it would appear that Tesla recall numbers don’t look too good when viewed from a wider industry angle. However, it is important to note that numbers alone don’t tell the entire story; recall severity is also an important part of the discussion. For example, more than 42 million cars from 19 automakers were recalled over faulty airbags manufactured by Takata, a Japanese auto supplier. That defect alone has accounted for more than a dozen deaths and hundreds of injuries; it eventually bankrupted Takata.
On the other hand, Tesla’s recalls have not resulted in any crashes, and all malfunctions on the car have been corrected with software updates, making the fixes faster and cheaper. Other automakers are also trying to catch up to Tesla’s ability to sell software-based services across its installed base of vehicles.
“We really didn’t have full modems in vehicles until full-year sort of 2020-ish,” said Ted Cannis, CEO of Ford’s Pro business, at a November investor conference. “Now we have this capability that we can add these higher-margin software sales (and) annual subscriptions.”