European electric vehicle (EV) maker Polestar (NASDAQ:PSNY) is making strong gains in the market today despite recently announcing its first U.S. recall. PSNY stock is up nearly 7% today following a Tuesday night recall order from the National Highway Traffic Safety Administration.
It seems the saying “sell the news” doesn’t always ring true as Polestar enjoys the fruits of a not-so-pleasant news release. 66 Polestar 1 vehicles were recalled Tuesday evening on reports that defective high-voltage batteries may overheat when fully charged, potentially even to the point of setting on fire. The battery fault was apparently a product of the automaker’s battery cell supplier, China’s Forever Energy, with sister company Volvo first detecting the issue back in September.
It’s worth noting the recall is exclusive to certain Polestar 1 vehicles — coupes in particular. It does not impact the current model, the Polestar 2, which represents most of the company’s current vehicles sales.
According to Polestar, the company will eventually replace the error-prone battery cells for vehicle owners. However, the parts likely won’t be available until mid-2023. Until then, Polestar plans on rolling out software updates to prevent the batteries from fully charging, mitigating the problem until they can install new units. Unfortunately, this means some owners will have to deal will a slightly reduced range until the new units arrive.
With Tuesday’s recall, Polestar joins the ranks of, well, practically every other auto maker in the world. In this case, a 66 car recall is notably small, likely the reason investors are still jumping on the stock.
PSNY Stock Enjoys Uptick in Otherwise Slow Year
While today’s jump is certainly promising, it does little to hide PSNY’s relatively disappointing performance in 2022. Polestar stock is down nearly 60% as part of the bear market in tech and growth stocks this year. That’s a far wider loss than the S&P 500, which is down 19%, or the tech-heavy Nasdaq, down 32%.
EV recalls have been something of a trend lately. Tesla (NASDAQ:TSLA) recalled almost 4 million vehicles this year, largely due to software bugs. Because electric vehicles are more dependent on software to function properly compared to most combustion engine alternatives, minor recalls are becoming more prominent. Many EV owners are learning early on in ownership the importance of being aware of relevant recall orders.
In Polestar’s case, the recall was limited to vehicles made between Sept. 11, 2019 and May 12, 2021, meaning no current-year models were affected.
On the date of publication, Shrey Dua did not hold (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.
