What is wrong with Tesla? Is Elon Musk doing something to fix the problem?

Summary

  • Tesla stock came under scrutiny recently on complaints related to battery fires and other quality issues with the company’s electric cars.
  • While recently interacting with an auto industry consultant Sandy Munro, Musk admitted to some of the shortcomings.
  • The stock has given a negative return of 14.5% so far this year.

After jumping nearly 20% from nearly US$40 to US$883 in the last two years, Tesla stock fell about 33% of its 2021 highs. The stock has given a negative return of 14.5% so far this year. While the latest dip offers an exciting entry opportunity to some, a section is concerned over the issues surrounding the global electric vehicle manufacturers who have challenged the years-long dominance of the legacy auto manufacturers.

Earlier this year, Tesla was under scrutiny from the Chinese regulators after the consumers raised concerns over battery fires and other quality issues with the company’s electric cars.

Source: © Sergiomonti  | Megapixl.com

According to a post on WeChat, the state regulator said that the government officials interviewed Tesla executives and “asked them to strictly abide by Chinese laws and regulations, strengthen internal management, and implement corporate quality and safety regulations.”

Tesla acknowledged the shortcomings and even agreed to fix the issues, the post also said.

READ MORE: Tesla pulls the plug on Model S Plaid Plus plan

Elon Musk on Model 3 Sedan

Amid criticism, the company’s chief executive officer (CEO) Elon Musk too acknowledged the ongoing quality problems with Model 3 sedan. While interacting with an auto industry consultant, Sandy Munro, Musk admitted to the shortcomings.

Earlier in 2018, Munro had issued a highly critical review of Model 3. He had then said that the concerns around Tesla’s popular car model were like the ones seen in Kia cars back in the 1990s.

"I thought your criticism was accurate," Musk told Munro in an interview that was released recently on YouTube. Musk showed a very receptive shade of his personality in the interview, against his usual attacking best which does not adore critics.

Musk also blamed the boost in production for company’s quality issues. On being asked about the right time to buy Tesla, Musk replied that it was either at the start of the production or once the production had levelled off. 

Source: © joeduffy1   | Megapixl.com

READ MORE: Second high-profile exit: Another Tesla veteran quits

Car recall programmes in the US and the UK continue

In February this year, Tesla extended the recall programme for certain Model S and Model X cars for repairing software faults, which could cause an accident to UK owners. Earlier, the wide-reaching recall was issued for over 130,000 cars in the US.

The cars that require recall are Model S produced between 2012 and 2018 and Model X between 2016 and 2018. The fault is due to a centre display memory device - 8GB embedded MultiMediaCard (eMMC) in the media control unit (MCU) - which wears down over time, leading to "a persistent blank centre display that does not recover after restarting the touchscreen, loss of certain functionalities, and/or a vehicle alert signaling memory storage device degradation".

Two new recalls

In June 2021, the company issued two new recalls. The reason was possible issues related to the seat belt. The fault was expected to affect up to 7,696 vehicles in the US, according to the National Highway Traffic Safety Administration website.

Tesla has also faced issues in terms of getting factory permits, such as in Germany. The opening of the company’s Berlin factory was delayed by nearly six months due to permit issues.

Self-driving cars

After a car crash made news in April this year, concerns rose around the safety of Tesla’s self-driving cars. The California Department of Motor Vehicles is probing if the electric carmaker’s self-driving feature is misleading consumers.

Source: © Winnietam   | Megapixl.com

Sequential fall in quarterly revenue

While Tesla’s revenue grew in the first quarter of the year compared to the year-ago quarter, it fell sequentially. The company said that the fall in revenue was due to lower average selling price of its units.  In addition, most of the company’s profit was from regulatory credit and not from its core car selling business.

Several governments give regulatory credits as a part of various environmental regulations such as clean fuel or zero-emission vehicles. These are based on either the number of electric vehicles the company sells or the level of emissions.

Finally, some rebound. But things will take time to get fixed

After a short dip in China, Tesla’s sales rebounded in May. China is among the key markets for Tesla, contributing nearly 30% of its first-quarter sales. According to the China Passenger Car Association data, the company sold 21,936 cars to Chinese customers in May. It is nearly double the number delivered in April. However, it is still much below the near-36,000 mark in March.

READ MORE: Why is Tesla doing away with radar for Autopilot in some models?

Comment


Disclaimer