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NHTSA Going To Squeeze 158,000 Car Recall Out Of Tesla

Jan. 14, 2021 3:30 PM ETTesla, Inc. (TSLA)1 Comment
Ruerd Heeg profile picture
Ruerd Heeg's Blog
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Yesterday Tesla (TSLA) got a letter from the Office of Defects Investigation (“ODI”) of the National Highway Traffic Safety Administration (“NHTSA”). The letter requests a recall because this organization has determined the media control unit is a safety risk. Allegedly affected vehicles are model year 2012 through 2018 Tesla Model S and model year 2016 through 2018 Tesla Model X.

The letter mentions 158,000 as the number of affected cars. The letter also mentions about 30 recalls of other cars for similar defects. I think Tesla will have to comply with this request. Eventually it will also have to recall cars in Europe and China for the same defect. I estimate the number of cars outside the US with this defect of the media control unit is about 70,000 cars.

Most likely Tesla has refused to recall these cars so far. See here. If Tesla continues refusing to recall these cars I expect the NHTSA to start enforcement procedures against Tesla. With more than 30 recalls for similar defects I do not have any doubt such enforcement actions will be successful.

Differently said, Tesla has no longer regulatory immunity. Imagine we extrapolate this to other defects: whompy wheels, sudden acceleration events, battery issues and autopilot. Eventually I think it will have to recall every car.

It is still an unanswered question why Tesla has enjoyed so much regulatory immunity so far. See this and this thread on Twitter about the government engineer who investigated sudden acceleration events with Teslas. Why couldn't find he anything? Did he or family members own the shares? In any case, with this recall request and a new administration I expect regulatory problems to grow for Tesla.

Bottom line

My opinion on the stock is still strong sell.

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Analyst's Disclosure: I am/we are short TSLA.

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