Tesla Inc (TSLA) stock rallied on Friday, recovering a good chunk of the value it lost on Thursday after the company announced a safety recall. The problem is related to the brakes in the Model S and Model X vehicles that were built between February and October 2016. Given that this time period includes more than half the vehicles the company has manufactured, it’s rather surprising that its stock didn’t fall much further than it did. Then again, this is probably just a symptom of the mindset Tesla investors are usually in.
Tesla (TSLA) issues safety recall
The EV maker announced the recall in a statement on its website on Thursday. Tesla Inc (TSLA) said it had found a “potential manufacturing issue” with the electric parking brakes on the affected vehicles. The problem could keep the brake from releasing, although the company expressed doubt that it could ever result in a real safety concern and emphasized that no accidents or injuries related to it have been reported.
But then this is where the company excels at turning a problem into a PR opportunity: “In order to be overly cautious, we are going to be proactively replacing these parts to ensure that no issues arise.”
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Tesla Inc (TSLA) explained that there was a “small gear” on the parking brakes in the affected vehicles that may have been improperly manufactured by its third-party supplier. If the gear in question were to break, then the brake would still keep the vehicle from being able to move but it would also get stuck. The company said it hasn’t heard of any cases in which the parking brake did not hold the vehicle in place or failed to stop a vehicle in an emergency due to this problem.
The company is recalling 53,000 vehicles for the parking brake, although it estimates that less than 5% of the recalled vehicles may actually be affected. Tesla is ordering replacement parts and expects to be able to have enough parts for all the recalled vehicles by October. The company will begin sending out official recall notices to its customers soon.
Tesla (TSLA) stock falls, but not much
Tesla Inc (TSLA) stock rose by as much as 0.87% to $305.13 during regular trading hours on Friday, bringing it back to around the same level it was at Wednesday evening before the recall news. Thursday was a wild ride for Tesla stock, as it surged in the morning hours and then plunged in the afternoon after being buffeted by the recall news. The shares have been carried on the wind for years, with the slightest breeze capable of carrying them onward and upward.
Short-sellers may look at the recall news with disgust, given that it hasn’t taken much to carry Tesla stock upward, but it’s proving to be much more difficult to find news that can drag it down. The company will release its next earnings report early next month, but that seems to offer little hope to short-sellers. Investors happily pushed Tesla Inc (TSLA) stock sky-high on the first quarter delivery news, so it’s hard to imagine what might cause them to unload those shares.