Tesla recalls early Model S cars to retrofit steering

Dana Hull
Bloomberg News
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Tesla Inc. is recalling all Model S cars built before April 2016 to retrofit a power-steering component as the company caps its worst one-month performance in the stock market since December 2010.

The issue, which the carmaker said has not led to any accidents or injuries, impacts only the flagship Model S sedan, not the Model X sport utility vehicle or more affordable Model 3. The recall affects roughly 123,000 vehicles globally. Loup Ventures managing partner Gene Munster estimated the fix could cost Tesla more than $60 million.

“The bigger issue is erosion of brand which impacts demand for Tesla’s and investors’ willingness to keep funding the Tesla mission,” Munster wrote in a note to clients. “Our patience is being tested, but we continue to expect Tesla to be a winner” in electric and autonomous vehicles.

The carmaker said it’s performing the voluntary recall after observing “excessive corrosion in the power steering bolts, though only in very cold climates, particularly those that frequently use calcium or magnesium road salts,” according to an email sent to impacted customers Thursday.

“Nonetheless, Tesla plans to replace all early Model S power steering bolts in all climates worldwide to account for the possibility that the vehicle may later be used in a highly corrosive environment,” the electric-car maker said in the email.

Germany’s Manager magazine reported Friday, without identifying where it got the information, that the bolts were supplied by Robert Bosch GmbH. Bosch representatives weren’t immediately available to comment during the Easter holiday.

Tesla has been routed this month as analysts and investors have questioned the company’s ability to mass-manufacture its new Model 3 sedan. Bottlenecks at Tesla’s battery factory and assembly plant have undermined that effort, limiting the return on that investment and triggering concern that the company may need to raise more cash. Moody’s Investors Service also downgraded Tesla’s credit rating further into junk on Tuesday.

Shares fell 22 percent this month in New York, the biggest one-month drop since the year it went public. The stock rose 3.2 percent Thursday to close at $266.13.

Still, Munster said he’s optimistic on the company, which also saw its stock hit after a fatal crash involving a Model X last week.

“When we heard the recall news tonight we asked ourselves, do we still believe in the story? The answer is yes,” Munster wrote in the note dated March 29. “Our support is based on a view that the company is uniquely positioned to capitalize on a dramatic shift in auto (computer on wheels), innovate in both EV and autonomy, and usher in a new paradigm of manufacturing efficiencies.”

The Palo Alto, California-based company led by Elon Musk is advising Model S customers that no immediate action needs to be taken and that they may continue to drive their cars. Deliveries of the Model S began in June 2012.

“Tesla will contact you to schedule an appointment when parts are available in your region,” the company said, adding that the retrofit will typically take about an hour.

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