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Tesla stock price slips after regulators ask for a recall of 158,000 vehicles

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  • According to regulators, the faulty media control unit (MCU) presents a safety concern
  • Model S sedans (produced between 2012 and 2018) and Model X SUVs (2016 and 2018) are affected
  • Shares of the electric car maker rose nearly 25% last week

Shares of Tesla (NASDAQ: TSLA) are trading 1.2% lower today after the National Highway Traffic Safety Administration (NHTSA) issued a letter asking Tesla to recall around 158,000 vehicles due to safety concerns.

Fundamental analysis: Safety issued determined

After an investigation that took months to complete, the regulator determined that the faulty media control unit (MCU) presents a safety concern. The Administration noted that a faulty MCU has an impact on the backup camera and defogging and defrosting setting units.

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“As discussed more fully below, ODI has tentatively concluded that the failure of the media control unit (MCU) constitutes a defect related to motor vehicle safety. Accordingly, ODI requests that Tesla initiate a recall to notify all owners, purchasers, and dealers of the subject vehicles of this safety defect and provide a remedy, in accordance with the requirements of the National Traffic and Motor Vehicle Safety Act,” it is said in the letter. 

Vehicles affected by this issue are Model S sedans manufactured between 2012 and 2018 and Model X SUVs produced between 2016 and 2018. In the past, Tesla already provided some information to regulators, but they are claimed to be “insufficient”. 

The electric car maker admitted that all of the media storage units found in these vehicles are likely to fail due to limited storage capacity. 

“NHTSA notes that Tesla has implemented several over-the-air updates in an attempt to mitigate some of the issues described in this letter, but tentatively believes these updates are procedurally and substantively insufficient. As a matter of Federal law, vehicle manufacturers are required to conduct recalls to remedy safety-related defects.”

Tesla hasn’t responded to this letter so far. 

Technical analysis: A parabolic rise

Tesla stock price gapped about 1.3% lower at the open today on the NHTSA letter. Shares of the electric car maker rose nearly 25% last week to hit a fresh record high of $884.50 on Friday. 

Tesla stock daily chart (TradingView)

It’s difficult to digest price action given that the stock rose almost vertically in the last year. Shares doubled in value since mid-November. On the downside, any pullback towards short-term support at $745.00 is likely to be regarded as an opportunity to invest in Tesla shares.

Summary

Shares of Tesla gapped lower today after the National Highway Traffic Safety Administration (NHTSA) issued a letter asking the electric car maker to recall around 158,000 vehicles amid safety concerns.