Tesla recalls 363,000 vehicles over faulty self-driving software

Yahoo Finance’s Pras Subramanian joins the Live show to discuss Tesla’s latest recall, affecting around 363,000 vehicles.

Video Transcript

- Tesla is recalling over 360,000 cars with driver assistance software in the United States. It'll be entirely conducted via an over-the-air software update, and it comes after the investigation from a federal agency warned over the full self-driving feature on certain models, saying that it could have insufficient adherence to local traffic laws. So let's put it into context. We've got Yahoo Finance's Pras Subramanian. Pras, break this down a little bit for us, the details here about the Tesla recall and how they're going to issue this update, as well as what this means for production of future vehicles.

PRAS SUBRAMANIAN: Hey, Brad. So, you know, these issues have been known for some time now with Tesla's FSD beta software, but just to quickly sort of go through what NHTSA had a problem with was, basically, like you mentioned, certain local laws not being adhered to. So, essentially, the car sometimes will drive through an intersection in a turn-only lane, not in a straight lane, will blow through, sometimes, stop signs at stop sign-controlled intersections. They may also not respond to posted speed limits. You know, that software is supposed to adjust itself when it sees a speed limit. It may not do that. And then, if the driver adjusts the speed limit above the posted limit, it will not auto-correct that either.

So NHTSA says this could all lead to a crash, so they basically forced Tesla's hand into to fixing these issues with a software update. We don't know how this software update will actually affect the features of FSD beta. We'll see how that happens. But this is a big issue for the company. You know, we're talking about how software is a big component of a Tesla profit model, a high margin sort of offering. You know, we had a Barclays note this past week talking about how bullish they are on Tesla's autonomous sort of technology. So not a good look at the recall. And let's not forget that NHTSA and the DOJ are both still investigating Tesla over FSD.

- Is this a detractor for any type of buyer interest in Tesla?

PRAS SUBRAMANIAN: I think it might detract people from paying the $15,000 for the feature for FSD. You might say, you know what, I'll just buy the car. Once they iron out some of the software details, I can always add that feature later. But, I mean, $15,000 for software, to me, is kind an astounding number. But, you know, like I said, 360,000 people actually bought this piece of software for around four million cars that the Tesla has made overall. So around 10% of cars have it, so people have been buying it.

- Hey, Pras, this has been a bad week for recalls. You have the Tesla recall. You had four with battery problems. What's the bigger takeaway for investors? Is it that this push to autonomous and electric power vehicles might be more tougher on these companies than is priced into the stock?

PRAS SUBRAMANIAN: You know, speaking of electric vehicles, there might be some growing pains here, right? So especially the F-150, just came out last year, this is bound to happen in terms of some technical snafus. I'm not sure how bad the Ford Lightning battery issue is going to be. They claim that they've figured it out. We'll see what happens in a week or two. But, yeah, I think you're right, there's a growing pains issue with a lot of these traditional automakers getting into electrics.

But, you know, I want to note that we saw, this week, Ram with a big recall on its diesel trucks, right, and also Nissan with another recall on its non-electric cars. So it's just part of the business, unfortunately, and with NHTSA involved, they're going to force these automakers to sort of do what's right for consumer safety.

- Good point. Pras Subramanian, thanks so much. Appreciate it.