Tesla Inc.’s (NASDAQ: TSLA) shares have raced higher over that past several years, giving the car company a market cap above that of many huge manufacturers, such as Ford, even though Tesla only produces tens of thousands of cars each quarter. Much of the increase is due to innovation, and most of the rest on the perfection of Tesla cars, both in terms of technology and the quality with which they are built. The quality reputation has started to fall apart.
Tesla decided to recall 11,000 of its Model X sports utility vehicles. According to Bloomberg:
Tesla Inc. is recalling about 11,000 Model X sport utility vehicles due to possible issues with their second-row fold-flat seats.
Only about 3 percent of the electric SUVs being recalled are expected to have issues, which the carmaker said it can correct in about 10 minutes with its mobile service operators. The problem, which was discovered in internal testing, involves incorrectly adjusted seat cables. Tesla has not received reports of any issues or accidents relating to the problem, it said.
Even if the problem is not significant, Tesla’s reputation has been damaged.
Two weeks ago, Tesla reported an unexpected slowdown in the production of its new Model 3:
Model 3 production was less than anticipated due to production bottlenecks. Although the vast majority of manufacturing subsystems at both our California car plant and our Nevada Gigafactory are able to operate at high rate, a handful have taken longer to activate than expected.
This triggered a rumor that some parts of the new car had to be built by hand. Tesla said that suggestion was “fundamentally wrong.” However, once again, Tesla’s ability to build the perfect car has been undermined by news that its production process is less than perfect.
Do these two pieces of news about Tesla vehicles reveal serious problems? Maybe not. But for a company with the reputation for never having any problems, they are a blow.