Model S recall shows Tesla’s ‘personal’ relationship with customers
Reports surfaced late last week of Tesla’s voluntary recall of all 90,000 Model S sedans produced, but the recall is likely not going to impact the vehicle’s residuals or used prices as the automaker works on growing its certified pre-owned program.
In fact, when asked if this recent move will impact used pricing or residuals for these models, Larry Dixon, senior manager of market intelligence at NADA Used Car Guide, said “not at all.”
The recall is being conducted to check for a possible defect in the front seat belt assemblies, a Tesla spokesperson told Auto Remarketing on Monday. Most of the affected vehicles are in the U.S.
According to a Reuters report, the worldwide recall is being conducted in light of a single report to the automaker made earlier this month regarding a front passenger seat belt assembly breaking in a Model S in Europe.
Though Tesla said there have been no accidents or injuries related to the issue and that it expects the majority of the seat belts to be fine, the automaker has asked Model S sedan owners to bring their vehicles into a Tesla service center for an inspection of a bolt that attached the seat belt mechanism to the body of the car.
Since the voluntary recall was put into play because of a single report — and no known root cause has been identified — Auto Remarketing reached out to Autotrader to better understand if these quick-acting preventative measures are becoming the norm as high-profile recalls, such as the Takata airbag issus, have automakers on edge.
Michelle Krebs, Autotrader senior analyst, explained there definitely has been a shift in automaker reaction to vehicle issues as regulators and shoppers are becoming more aware of recalls due to recent media explosions.
“After the Toyota sudden acceleration, GM ignition and Takata airbag recalls, we generally have been seeing automakers react very quickly to recalls so as not to incur the wrath — and fines — of NHTSA and to prevent bad public image problems. Couple this with the fact that Tesla strives to set itself apart in all ways from other automakers and it is always in the limelight, it is not surprising that Tesla is moving swiftly to do a recall even after only one complaint,” Krebs explained.
She also noted it is important to keep in mind Tesla sales volume remains “miniscule” in comparison to some of these large automakers, so it is much easier to service all of its Model S customers as it doesn’t involve millions on vehicles on the road.
This type of recall also says a lot about Tesla’s relationship to its shoppers, as it seems very intent to make sure no other owners encounter the same problem, even though they aren’t even sure of the cause yet or if it is an issue in other vehicles.
“Tesla has a very personal relationship with its shoppers, indeed, as it can be because of its low sales volume and the exclusive nature of its expensive product,” said Krebs. “Clearly, Tesla wants to nip this in the bud, and it wants to demonstrate it can handle a product quality problem within its current direct-to-consumer business model.”
Dixon said this action is in line with the automaker’s “unique market position — a progressive, modern automaker that moves quickly and proactively to address consumer issues.”
Though the current number of Teslas on the road remains small, making recalls pretty simple to carry out, the automaker’s direct-to-consumer sales model might make recalls of a larger size difficult to complete. Though there are 125 Tesla service centers around the world, the automaker doesn’t have the network of franchised dealers most automakers normally utilize to service recalled vehicles.
Krebs shared this might pose a problem for Tesla down the road, especially in light of watching recent large recalls play out.
“As Tesla sales volume and product portfolio grow, recalls could be much more challenging without a network of dealers. Dealers have been critical on the front lines of big recalls like those of Toyota, General Motors, Takata and upcoming with Volkswagen diesels,” said Krebs. “Undoubtedly, Tesla is working on a plan for how it will service many more vehicles on the road and would deal with a recall situation.”
Dixon also said it doesn’t seem to be an issue at this point, also bringing up the fact that Tesla service employees make house calls, as well, but again, that could change as production numbers grow.
“Consumers can either bring affected cars to a Tesla service center, or a Tesla 'ranger' will come to customers to assess the situation,” said Dixon. “Tesla is also examining cars at their Supercharger stations, which are spread strategically across the country. As Tesla grows, however, large recalls could present more of a challenge.”
After the news came out on Friday, share price for Tesla dropped by 2.2 percent, but Krebs said this is to be expected, and the shift isn’t anything the company or investors should be concerned about.
“Tesla’s stock price rises and falls with every little bit of news that comes out, including this recall. Next week, it’ll be something else to move the stock. This recall and stock price drop won’t have any lasting impact,” Krebs said.
Dixon echoed that sentiment, sharing the recall will likely have no impact on consumer confidence toward Tesla.
“Telsa acted proactively based on one recorded case involving a improperly installed seat belt,” said Dixon. “Consumer confidence is typically affected by my larger recalls involving more serious issues/accidents with intense, prolonged media coverage. I believe Tesla's shares have recovered from Friday's dip.”
Those watching Tesla are paying much closer attention to the automaker’s operational numbers.
“More important to the value of the stock is that Tesla meets its sales delivery targets, its product roll-out promises and its financial objectives,” Krebs concluded.