Tesla (TSLA) is dealing with another vehicle recall, this time affecting its recently launched Cybertruck. TSLA is recalling 11,688 Cybertrucks due to faulty windshield wipers that could impair visibility, and 11,383 Cybertrucks because of improperly secured trunk bed trim that may detach and create a road hazard.
- The Cybertruck has faced multiple issues since its highly publicized and delayed launch on December 1, 2023. Initially, TSLA announced that only the most expensive version, priced at about $80,000, would be available in 2024.
- Despite the high price, the vehicle has encountered numerous problems. On April 19, the U.S. National Highway Traffic Safety Administration (NHTSA) ordered TSLA to recall about 3,900 Cybertrucks to fix a stuck accelerator pedal issue.
- The Cybertruck's expensive and rigid stainless-steel body has also raised concerns. Some owners have reported potential rusting on the panels, while others have safety concerns due to the lack of shock absorption from the metal.
- Unlike the massive recall of TSLA's Autopilot system, which affected over 2 million vehicles last December and was resolved with a software update, the Cybertruck recalls require owners to bring their vehicles in for costly physical repairs.
Despite the ongoing issues with the Cybertruck, there is some positive news for TSLA today.
- Rising competition and macroeconomic headwinds have impacted TSLA's business in China, but demand has recently surged. In April, China shipments decreased by 18%, leading TSLA to cut its Shanghai factory headcount by 10%. However, in May, China deliveries jumped by nearly 17% compared to April, boosting Q2 delivery expectations.
- TSLA is expected to release Q2 deliveries on July 2, with estimates suggesting a quarter-over-quarter increase of around 15%.
The main takeaway is that the recalls add another setback to the Cybertruck story, but the financial impact should be limited given the relatively small number of Cybertrucks on the road. Therefore, the more positive sales trends in China are likely having a greater impact on TSLA stock today.
