Doors Won't Open After Accidents: 3 Million Vehicles Recalled... "Tesla Faces Brand Trust Crisis" [Click e-Stock]

Daishin Securities: "Short-Term Downward Pressure on Share Price"

Regarding the large-scale recall announced in China by nine electric vehicle manufacturers, including Tesla, Daishin Securities stated on August 25, "There is a risk that this may spread into a brand trust issue for Tesla, amid ongoing margin pressures."

On August 21, nine companies including Tesla in China announced a recall affecting 4.3 million vehicles, marking the largest recall in the history of the Chinese automotive market. The recall was prompted by concerns that if a vehicle loses power due to an accident or flooding, the electric door handles may fail to function, making it difficult for occupants to escape.

Tesla vehicles currently feature embedded electric door handles. While these handles provide a sleek design aesthetic, they have a critical drawback: if a collision cuts off power, the handles become inoperable, preventing occupants from escaping and potentially leading to death or serious injury. Bloomberg reported that at least 15 fatalities occurred because rescuers could not open the doors when Tesla vehicles caught fire after crashes.

The root cause of this situation lies in the widespread adoption by other companies of the door handle design first introduced by Tesla over a decade ago.

Responses are split into two approaches: one involves attaching labels to guide owners on how to manually open the doors; the other is to wirelessly distribute software that automatically lowers the window when a collision occurs. Since the software can be managed remotely, the cost burden is not significant; however, for label attachment, owners must visit the service center in person, which can be inconvenient.

The recall is currently limited to China. In the United States and Europe, only investigations are underway and no recall decision has been made yet. China has already decided to ban this type of door handle starting in 2027.

For fiscal year 2025, Tesla’s revenue totaled $94.83 billion, down 2.93% from the previous year, with operating profit at $4.36 billion (an operating margin of 4.59%). The consensus for fiscal year 2026 projects revenue to rise by 12.07% to $106.28 billion, but operating profit is expected to decline slightly to $4.04 billion (operating margin of 3.80%).

Amid these developments, Daishin Securities pointed out two key concerns: first, the most recent quarterly operating margin hit an eight-quarter low at 1.4%; and second, the simultaneous ramp-up of production for multiple new models presents execution risks.

Daishin Securities believes that the direct financial impact of this recall will be limited, given its software-focused response structure. Researcher Jaeun Cho at Daishin Securities emphasized, however, that the fact that Tesla's signature design triggered the largest-ever recall in China could become a burden on brand trust in the Chinese market, where deliveries make up a substantial proportion.

Cho added, "This could put short-term downward pressure on the stock price," but also judged that "the scale of the costs themselves is not large, so the impact will likely be limited." He further noted, "It will be important to monitor the results of follow-up investigations and possible recall expansion by regulatory authorities in the United States and Europe, as well as how Chinese consumers respond and whether this leaves a mark on delivery volumes."

This content was produced with the assistance of AI translation services.