TSLA Tesla Inc

By Rebecca Elliott and Ben Foldy 

Federal regulators are asking Tesla Inc. to recall about 158,000 vehicles over safety concerns in what would amount to one of the biggest safety actions by the electric-vehicle maker.

The National Highway Traffic Safety Administration asked Tesla in a Jan. 13 letter to recall some Model S luxury sedans and Model X sport-utility vehicles. NHTSA asked for the recall because the cars' touch screens can fail after a few years of use, affecting safety functions such as defogging and back-up cameras.

Some car safety recalls run into millions of vehicles. Though modest by historic numbers, the action would represent a relatively large recall for Tesla, which has far fewer cars on the road than some rivals. The Silicon Valley car maker delivered nearly 500,000 vehicles globally last year, roughly 205,600 of them in the U.S., according to market-research firm Motor Intelligence. Tesla doesn't break out its sales by region.

Tesla doesn't have to recall the vehicles, though NHTSA said in the letter that if the car maker doesn't take the action it has to provide an explanation for its decision. The agency can then escalate the matter to a public hearing and eventually seek to force a recall through the courts.

Sam Abuelsamid, an analyst at Guidehouse Insights, said the recall request was significant and could cost $300 million to $500 million to address.

Tesla in 2018 recalled 123,000 Model S cars over a finding that cold weather could corrode some bolts, potentially leading to power-steering failures.

Tesla's stock has been flying high in recent months, boosted by growing investor confidence in Chief Executive Elon Musk's vision of the mass-appeal of electric cars. Tesla last year became the world's largest car maker by market capitalization and this month became America's fifth largest public company. The company's stock is up more than 700% over the past year.

NHTSA's latest recommendation would affect Model S cars built between 2012 and 2018 and Model X SUVs made from 2016 through 2018, the agency said.

Regulators say the car's console touch screen, known as its media control unit, can fail when its memory chip runs out of storage capacity. That can happen over time, NHTSA said, as drivers turn on the vehicle. It would take about five to six years on average for the fault to occur, the regulator has determined.

When the touch screen fails, it affects vehicle functions such as defrosting, the driver assistance system and turn-signal functionality, NHTSA said.

The regulatory agency said that Tesla has tried to rectify the issue through over-the-air updates, but it believes the efforts were insufficient. As a matter of federal law, vehicle manufacturers are required to conduct recalls to remedy safety-related defects, the agency said.

The request to recall around 158,000 cars for an issue linked to its computer chips comes as the auto industry struggles with a broad shortage of semiconductors that has been disrupting production world-wide.

Tesla didn't immediately respond to a request for comment. Mr. Musk has emphasized Tesla's focus on safety and complained in the past that the company receives outsize attention for incidents that other auto makers also face.

In its letter to Tesla, federal regulators said other manufacturers had issued recalls for issues similar to those caused by the failing touch screens.

As part of the agency's investigation, NHTSA said Tesla provided data showing that roughly 12,600 of its cars already had experienced the problem, with models made between 2012 and 2015 having a failure rate around 15%. The company also confirmed to the regulator that all of the touch screens eventually would fail, the letter said.

Write to Rebecca Elliott at rebecca.elliott@wsj.com and Ben Foldy at Ben.Foldy@wsj.com

(END) Dow Jones Newswires

January 13, 2021 20:32 ET (01:32 GMT)

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