Tesla faces 'black eye moment' with recall of cars sold in China

Yahoo Finance’s Pras Subramanian breaks down the latest hurdle Tesla faces in China.

Video Transcript

ALEXIS CHRISTOFOROUS: A big black eye for Tesla today in China after the government ordered almost all Tesla cars there to be fixed to address a safety issue. We've got Yahoo Finance's Pras Subramanian here with us to break it all down. And Pras, I took a look at Tesla's stock. It's actually up 2%. So what do you make of that?

PRAS SUBRAMANIAN: Well, I would say that it's a bit of-- you know, there's some bad news, but also not as bad news, as it may sound. You know, there's about 285,000 vehicles that were recalled in China. About 250,000 of those made in China, but 35,000 made in the US. The concern is that you could actually switch on the autopilot function when you're turning the car or doing something because it's a stock on the steering wheel. If you were to turn that on mistakenly, the car could accelerate without you actually doing that and maybe leading to a collision.

But the potential-- that sounds bad, but the potential good news for Tesla is that it's actually alleviated with a soft recall or a over the air software update, Tesla pioneering that ability to kind of update your car and recall it in that way, which means it's a black eye for Tesla, but also, you can actually fix that relatively easy. Most cars can get this over the air update.

But I want to kind of also just-- the stock might be shaking this off. But I want to kind of, like, drill down. And this is actually just kind of another line in a string of these high profile problems in China with crashes. We saw battery fires, you know, this seemingly number of price changes and quality complaints from Chinese customers. So it's just, you know, even though they're able to [INAUDIBLE] this off, it's not that great for the company.

KRISTIN MYERS: Pras, I do want to ask you about competition in this space. I feel like almost every day I'm hearing of a new electric vehicle maker. So talk to us about some of the competition that Tesla is facing right now.

PRAS SUBRAMANIAN: Well, in China, at least, there's a number of smaller makers and some actually bigger names like Nio, Lee Auto, BYD, bigger car makers that are actually targeting the Tesla high end of the EV chain. But there's also a bunch of smaller makers, cars-- actually, makers that make cars that are very small that can park in really tiny spots. And GM's involved with a joint venture there.

So that's why there is a number of kind of avenues where Tesla could be under threat at China. But at the same time, they have such strong name recognition there, a lot of [INAUDIBLE]. Elon Musk is considered a godlike, larger than life figure. So that's what they do have going for them, but there's a lot of competition in that space there, especially in China.

ALEXIS CHRISTOFOROUS: All right, Pras Subramanian, always good to have you on the show. Thanks so much.