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Why Tesla Stock Popped Again Wednesday

What happened

For the third time this month, Tesla (NASDAQ:TSLA) has announced a recall of its electric cars in response to concerns by the National Highway Traffic Safety Administration (NHTSA). And for the third time this month, investors are shrugging off the news and bidding Tesla stock higher.

As of 9:40 a.m. ET, shares were up 2%.

Smiling woman checks her phone while waiting for her electric car to charge.

Image source: Getty Images.

So what

In this latest incident, NHTSA warns that in some Tesla vehicles, the windshield defroster may cause reduced visibility in certain conditions.  

To fix this problem, Tesla is recalling some 26,681 Model S, 3, X, and Y vehicles from model years 2020 through 2022. But once again, Tesla is planning to fix the problem with an over-the-air software update, meaning none of these “recalled” vehicles will ever need to visit a shop to get fixed.  

Now what

Once again, what at first sounds like bad news for Tesla (an issue with quality control) is turning into an example of the superiority of a software-centric car design that can be fixed remotely — making Tesla cars, and Tesla stock, more popular than ever. That being said, not all the news is good today.

In a separate announcement, this time published on Tesla’s corporate blog, the company says that the California Department of Fair Employment and Housing [DFEH] is suing it for “systematic racial discrimination and harassment” based on “alleged misconduct by production associates at the Fremont factory that took place between 2015 and 2019.”  

Details are scarce at this point. Indeed, one of Tesla’s biggest objections is that the “DFEH has declined to provide Tesla with the specific allegations or the factual bases for its lawsuit” so far. But in contrast to the series of recalls-that-aren’t-really-recalls, this latest news has the potential to turn into something that really could impact Tesla stock negatively.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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