Tesla Faces Recall Chaos, Deliveries Miss Forecasts

Tesla shares tumbled 6% in premarket trading after the company disclosed a recall of nearly 2 million vehicles for Autopilot defects, compounding a 9% year-over-year drop in second-quarter deliveries to 420,000 units. The recall, affecting models equipped with the driver-assistance system, stems from issues with the steering wheel and warning alerts that could increase crash risks, according to a filing with the National Highway Traffic Safety Administration. Intensifying competition from Chinese rivals like BYD eroded Tesla's market share in key regions, while margin pressures from price cuts and production ramp-ups further weighed on results.

The delivery miss underscores broader challenges for Tesla's growth narrative, as demand softened amid high interest rates and an aging lineup ahead of promised refreshes like the Cybercab robotaxi. Elon Musk pledged a software fix for Full Self-Driving version 13 in the coming weeks, aiming to restore confidence in Tesla's autonomy ambitions, but regulatory scrutiny and repair logistics could drag on execution. Gross margins, already squeezed to around 17% in the prior quarter, face renewed downside risks from the recall costs estimated in the hundreds of millions.

Traders should monitor Tesla's upcoming earnings call for updates on FSD adoption rates, China sales recovery, and 2024 delivery guidance, which analysts expect around 1.8 million units. Social media backlash, including trending #TeslaRecall memes and boycott calls tied to Cybertruck glitches, amplifies reputational risks that could spill into brand loyalty and used-car values. Any delay in the FSD rollout or escalation in regulatory probes may extend the bearish sentiment, with TSLA's valuation—still over 60 times forward earnings—leaving little room for error.