When Tesla (TSLA) and Ford (F) issued a recall, the meaning differs for both firms. Tesla’s recall is a software update. Ford’s F-150 Lightning battery production issue has higher relative costs. Which of those circumstances would warrant a strong buy rating for the stock?
Ford halted production and shipments of its electric pickup truck last week. It did not disclose any details of the problems. Investors must guess how severe the issue is.
For its traditional gas-powered business, Ford recalls are nothing new. They damage the brand and hurt confidence in the company’s reliability rating. The company said that it would build an EV battery plant in Michigan, partnering with a Chinese company. Despite heightening tensions between the U.S. and China, Ford is willing to take political risks with this plan.
Tesla’s recall of 362,768 vehicles provided bears an excuse to hurt the share price. The company is recalling the vehicles because of risks that the self-driving beta software could cause a crash. An over-the-air software update will have minimal operational costs. However, the media’s labeling of the update as a recall casts doubt on Tesla’s self-driving safety.
The driver-assistance package software failed to stop at intersections. It did not exercise proper caution at yellow signals, come to a complete stop at stop signs, or adhere to speed limits. The company did not agree with the NHTSA’s analysis.
Neither stock is a strong buy. Tesla already rallied, while Ford struggles to contain costs from recalls.
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