The Seat Belt Recall Won’t Hold TSLA Stock Back. Here’s Why.

Lately, a lot of Tesla (NASDAQ:TSLA) coverage has centered around the theme of recalls. We’ve seen two announced this past week, each one concerning a different part of the vehicle. Recalls for automakers never sound like good news, but on both days when the stories have broken, TSLA stock has been in the green. To the untrained eye, it might seem impressive that the electric vehicle (EV) innovator is able to withstand this type of negative coverage. Those who follow the company, though, know that it takes more than recalls to drive TSLA stock down.

Tesla (TSLA) Motors Assembly Plant in Tilburg, Netherlands.
Source: Shutterstock

What’s Happening With TSLA Stock

The week’s first recall centered around Tesla’s full self-driving (FSD) tech and its ability to stop. Today’s is about something seemingly more minor. According to reports, the company is recalling 800,000 Teslas due to a problem with the seat belt reminder chime. Nothing bad has happened on the road because of this problem, but traffic safety agencies are concerned.

As noted, this hasn’t affected TSLA stock. Shares have been rising steadily since markets opened this morning. Currently, they are up more than 3% for the day and show no signs of slowing down. Today’s growth has finally pushed TSLA stock back in the green for the week with gains of over 12%. While it remains in the red for the month, things are certainly looking up.

Why It Matters

Sometimes TSLA stock’s movements can be chalked up to pure market momentum, either positive or negative. That’s not the case today. Fellow EV players Lucid (NASDAQ:LCID) and Fisker (NYSE:FSR) are both in the green today, but Rivian (NASDAQ:RIVN) is falling. The negative press from the recall announcement would be enough to push smaller stocks down, but TSLA stock can withstand a lot.

If the FSD recall didn’t harm it, though, there was no way that the stock was going to be pushed down this time. The seat belt reminder chime is a luxury feature and one that drivers survived without for decades. Most drivers likely don’t need to be reminder to wear a seat belt in general. And according to The Hill, there have not actually been any incidents on the road that can be attributed to Tesla’s seat belt chime problem of which the company is aware.

When the National Highway Traffic Safety Administration (NHTSA) delivered a report yesterday, the worst thing it noted was that this Tesla feature could lead to some drivers forgetting to wear a seat belt on the road. This is clearly an example of a public safety agency taking a precaution. It is not an actual reason not to drive a Tesla.

If anything, this will serve the company well. It will allow it to fix an internal hardware problem and do a better job moving forward. The FSD incident was more likely to harm TSLA stock. It cast doubt on the company’s progress in the area of automated driving tech. However, nothing we’ve seen since indicates that drivers are too worried.

What It Means for TSLA Stock

What’s clear from this week is that product recalls don’t matter much to a company of Tesla’s status. The undisputed leader of the EV race isn’t going to be set back by hardware deficiencies. The fact that TSLA stock has continued to rise in the face of multiple recalls should reassure investors of the company’s market power.

TSLA stock has seen plenty of turbulence already this year but each time, it has managed to recover. This trend can be expected to continue into 2022 as the company works to scale production.

On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.


Article printed from InvestorPlace Media, https://investorplace.com/2022/02/the-seat-belt-recall-wont-hold-tsla-stock-back-heres-why/.

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