Tesla Shares Drop by 5% as the US EV Maker Recalls 700,000 Vehicles

Tesla shares continued on a downward spiral on December 20, dipping 5% in premarket trading. This Tesla shares drop comes after the stock dipped 8% on December 19, which was the worst trading day for the EV manufacturer since the 2022 elections.

According to CNBC, the stock price drop appeared to have been triggered by investors who took profits from the EV maker’s strong post-election performance.

Tesla vs Election

Tesla CEO Elon Musk was a key supporter of Donald Trump throughout the 2022 elections. Federal Election Commission filings show that Musk contributed $277 million to the Trump campaign.

Trump’s 2022 election win triggered a sharp rise in Tesla stock prices. This rise was due to increased investor bets that the EV maker would benefit as a result of Musk’s closeness to the newly elected president. Despite the recent Tesla share decline, the stock prices have remained 65% up since November 5, the presidential vote night.

Trump has appointed Musk to co-lead the newly formed Department of Government Efficiency. Trump’s transition team is reportedly planning to introduce a federal law to regulate self-driving vehicles. If this is the case, the regulatory framework will be a major boost for Tesla.

The EV manufacturer is betting its future on the possibility of launching fleets of robotaxis. Musk unveiled its Cybercab self-driving car concept in October 2024 during the WeRobot event.

Challenges with the FSD

Tesla is yet to fulfil the promise of delivering full autonomous vehicles. Its Autopilot, paid Full Self-Driving (FSD) service does not offer autonomous driving. It needs to be complemented by a human to oversee its actions and take over when need arises. Earlier this year, Mark Hawtin of GAM Investment Management said investor expectations of the FSD were likely misled.

“We should say what they’re doing, everyone’s talking about this full self-driving capability. What they’re going to be able to do in China is what they already do in the U.S. or U.K., which is sort of this assisted-driver capability,” Hawtin said.

In October 2024, the US National Highway Traffic Safety Administration (NHTSA) launched investigations on Tesla’s supervised version of Full Self-Driving (FSD) software.Tesla faced NHTSA investigation after a driver, who was using the FSD software, hit and killed a pedestrian. The probe was also triggered by other FSD-related collisions that occurred in low-visibility situations.

Last week, Tesla introduced the Actually Smart Summon (ASS) feature in China. The company took the ASS feature to China after it had introduced it in the US, the Middle East, and European markets. The full self-driving feature allows vehicles to drive autonomously from parking lots to locations within the driver’s vicinity. Tesla’s ASS feature comes with full self-driving and improved autopilot functions.

Tesla Vehicle Recall

Tesla issued a recall notice for close to 700,000 cars in the US on December 20. According to the company, the recall was due to problems with the pressure monitoring system. The EV maker says that tire pressure lights may not be warning drivers of low pressure properly. This could increase the risk of crashes as Tesla owners could drive with tires that are not inflated properly.

This is the 15th recall that Tesla has issued this year. Its largest recall was in July 2024 which affected 1.8 million cars. Over more than 2.7 million Tesla vehicles have been affected by recalls this year.

The US Tesla share price fall and vehicle recall happened at a time when Tesla sales had been declining in Europe. Data from the European Automobile Manufacturers Association showed that the car sales for the EV manufacturer dropped by 40.9% in November alone. This was more than the overall 9.5% drop in battery electric cars sales in the European bloc.