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The Tesla Motors Inc (TSLA) Recall: Bears See a Cloud; Bulls See a Silver Lining

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Politicians. Automakers. Auto owners. It’s fair to say that most people don’t like recalls. This one is different. Tesla Motors Inc (NASDAQ:TSLA)’s recent voluntary recall of its Model S sedans is yet another sign of how the company is distinguishing itself from other companies.

Tesla Motors Inc (NASDAQ:TSLA) announced the recall due to concerns that a rear-seat latch could malfunction in a crash. On Tesla’s blog, Elon Musk, Chairman and CEO, made sure to convey that no regulatory agency had required the recall

So, why is this seemingly negative event, in fact, a positive sign? Compared to how poorly other companies have handled recalls, Tesla impressively distinguishes itself.

Tesla Motors Inc (NASDAQ:TSLA)

Safety should never be a compromise

Having completed an investigation that lasted for nearly three years, the National Highway Traffic and Safety Administration recommended that Chrysler recall 2.7 million older Jeeps for fear that the fuel tanks could rupture, leading to possible fires in rear-end collisions. Chrysler, unhappy with the decision, met with Transportation Secretary Ray LaHood. The government reconsidered and allowed Chrysler to limit the recall to 1.5 million vehicles.

Three years of investigation results in a 2.7 million-vehicle recall. But several hours of meetings gets it down to 1.5 million vehicles? That’s fairly disconcerting.

Juxtaposed with the transparency and pro-active nature of Tesla Motors Inc (NASDAQ:TSLA)’s recall, Chrysler looks pretty foolish (and not in a motley way).

Attention to customer service

Granted, the recall is only affecting about 260 vehicles; nonetheless, the company is attempting to make it as painless for the customer as possible. “Tesla will pick up the car at a location of the owner’s convenience, provide a Model S loaner if needed, perform the work and bring the car back to the owner a few hours later.” This attention to customer service is consistent with an April 2013 announcement regarding the company’s service and warranty program. For cars that need service, customers are offered the following:

– Fully loaded Model S Performance 85 cars or Tesla Roadsters as loaners
– Tesla Motors Inc (NASDAQ:TSLA) will seamlessly valet the loaner cars to your location
– $600 annual service now optional with no effect on warranty
– Unconditional warranty for Model S battery, even for user error

Additionally, if a customer enjoys the loaner car more than the car which he is having serviced, he will have the opportunity to trade in his Model S for the loaner.

Interest in being proactive

Tesla Motors Inc (NASDAQ:TSLA) decided to initiate the recall before any customer complaints or notice from a regulatory agency. The company discovered the flaw and acted immediately. The expediency with which it acted is reminiscent of its first recall back in 2010 when 439 Roadsters were recalled due to concerns of a possible fire hazard involving the electrical system. In that instance, a customer was the one to identify the problem. According to Tesla Motors Inc (NASDAQ:TSLA)’s letter to the National Highway and Traffic Safety Administration, the customer discovered, “smoke and possible fire behind the right front corner of his vehicle. The customer was driving by a local fire station, where the fire was extinguished.”

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