Will Tesla Shares Drop After Massive Recall in China? Experts Hint It's a Positive Boost!

Will Tesla Shares Drop After Massive Recall in China? Experts Hint It's a Positive Boost!
Tesla performed a voluntary recall of over a quarter-million of their Model 3 and Model Y cars. But this shouldn't be a deterrence for traders and investors. In fact, this could be a very helpful move for Tesla. Photo : Charlie Deets/Unsplash

More than a quarter-million Model 3 and Model Y Tesla cars are being recalled after China's vehicle safety authority announced the implementation. Tesla owners, however, don't need to bring their cars into a service center to get their cars fixed.

Tesla China Recall

China's State Administratin for Market Regulation for vehicle safety announced that Tesla isimplementing a voluntary recall over the weekend, CNBC reported.

This recall is a software update that addresses alleged safety issues regarding its driver-assistance systems. Although Tesla owners do not have to go to a service center to proceed with the update, the fix is still considered a recall.

The driver-assistance systems safety issue affects 285,520 of its Model 3 and Model Y vehicles across the country.

The recall covered 249,855 Model 3 sedans and Model Y crossovers that were manufactured by Tesla in Shanghai. The other 35,665 Model 3 vehicles included in the recall were Teslas manufactured in the U.S. and imported to China, CNBC noted.

The problem in the system, according the the Chinese regulators, is that it can be accidentally activated, CNN Business explained. Drivers can mistakenly switch the active cruise contorl feature on or off in their Model 3 or Model Y vehicles in certain situations. This includes triggering the feature on or off while making a sharp turn.

The issue is especially dangerous when the driver's Tesla could suddently accelerate in extreme cases leading to collisions, SAMR said in their recall announcement.

The recall and the update fix was Tesla's initiative to eliminate potentially safety hazards after the regulators initiated a defect investigation. This pressure was in light of a string of high-profile crashes, price changes, and quality complaints Chinese customers raised in recent months.

Tesla has apologized for the recall over the weekends, adding in a statement that the company would strictly follow national regulations and "keep inproving our safety protection," CNN said.

 Read Also: Choosing Whether to Repair Your Car at the Dealership or a Local Garage

Tesla Stock Drop

The company's stock went down about 25 percent from a peak over the past year, CNN noted.

Short sellers and concerns about its management bench, and now the string of publicity issues in China aren't really helping Tesla's cause. Scrutiny from the Chinese government isn't helping either, and experts are suggesting that Tesla should really double down on their efforts to building more goodwill, customer service, and improving ties with the authorities.  

However, this shouldn't derail the electronic vehicle company in the near-term or long-term.

The act of voluntarily going out of their way to fix issues and elected to cover more than a quarter-million vehicles is a move that should present the EV company as one that deeply cares for its customers.This should also subtly make concessions with the Chinese consumers and government despite the less-than-ideal PR. 

This voluntary recall could even work in Tesla's favor, as the convenience of the software patch could be seen as an advantage over competitors, Taylor Ogan of Snow Bull Capital explained to CNBC.

The software patch is so easy to perform that some customers may not even really notice it, as well. Not to mention the update would take a minute fraction of the time customers would have to deal with bringing and leaving their vehicles in a dealership.

Not all car companies offer a software fix without requiring the customer to head over to the physical dealership. In the same manner not all companies could offer fixes for a fraction of the time. And so this could actually win over the Chinese market.

If Tesla could continue clearing their reputation, this could be a potential boost not only in the Chinese market, which the conpany considers its potentially largest market, but it could boost overall company growth. 

Related Article: Tesla Recalls Over 285,000 Cars in China; Assisted Driving Feature to Undergo Software Update

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