Tesla is voluntarily recalling around 123,000 vehicles worldwide because of power steering problems. Other problems such as the fatal accident involving a self-driving Model X and slow production times are hurting Tesla’s reputation. John Dyer reports from Boston.
American electric carmaker Telsa is voluntarily recalling around 123,000 Model S sedans.
The announcement was the latest bad news for a company that has long been viewed as a bright hope in the American technology and manufacturing sectors.
In addition to a fatal accident in California last week involving the autopilot function in Tesla Model X car and turbulence on Wall Street among Tech stocks, Tesla is due to release its quarterly report next week. Most observers said the Silicon Valley company will probably admit that it has failed to achieve its goal of manufacturing 2,500 cars per week.
Power steering failure
In an email to customers, Tesla said the recall involved bolts that road salt could corrode in cold weather, leading to power steering failure.
“If the bolts fail, the driver is still able to steer the car, but increased force is required due to loss or reduction of power assist,” the email said. “This primarily makes the car harder to drive at low speeds and for parallel parking, but does not materially affect control at high speed, where only small steering wheel force is needed.”
The problem could occur in Model S sedans built before April 2016, the email said, which would affect less than 0.02 per cent of the cars worldwide.
“There have been no injuries or accidents due to this component, despite accumulating more than a billion miles of driving,” the email said.
Autopilot accident under investigation
Headed by Elon Musk, the charismatic PayPal founder who also runs private aerospace company SpaceX, Tesla has been a popular company in the U.S. and abroad. But bad news like the recall and fatal accident have hammered Tesla’s reputation in recent weeks.
The National Transportation Safety Board is now investigating a March 23 crash near San Francisco that killed a Model X driver.
Assembly line challenges that Musk described as “manufacturing hell” have slowed Tesla’s production of its Model 3 cars at its so-called Gigafactory in Nevada. The Model 3 is the company’s first foray into mass marketed vehicles. Model S cars cost as little as $35,000, or half as much as it’s the company’s other luxury models.
Moody’s downgrades credit
Moody’s Investors Service downgraded Tesla’s credit rating earlier this week due to those concerns.
Moody’s noted that Tesla had $3.4 billion in cash and securities on hand at the end of 2017 as well as $1.9 billion in credit. But that was not enough to maintain operations, fix its assembly line problems and roll over debt that will mature in the near future.
That means Tesla will need to raise more funding.
“These cash needs will likely require Tesla to undertake a near-term capital raise exceeding $2 billion,” Moody’s said in a press release.
Tesla stock has fallen by around 22 per cent in the past month as a result of those concerns.
Borrowed time, borrowed money
Musk late last year unveiled an electric semi-tractor trailer truck and two-seat roadster, saying he wanted to start making the trucks by the end of next year. Those big promises are appearing increasingly out of touch with reality, said experts.
“I’ve said for some time that Tesla is far from a sure bet, or a stable company for that matter,” said Investing.com Senior Analyst Clement Thibault told The New York Times. “Tesla has been living on borrowed time and money for quite some time.”