Recall Reveals Why Tesla Will Come Out Ahead

A possible recall for Tesla may seem like a bad thing, but its quick fix for the offending Model S shows why this savvy car manufacturer is way ahead of its competitors.

After two incidents involving Tesla’s 2013 Model S striking metal objects on highways, causing punctured batteries and fires, the U.S. National Highway Traffic Safety Administration (NHTSA) opened a preliminary evaluation of the car’s safety.

This is a serious concern for Tesla – over the past five decades 390 million cars, trucks, buses, recreational vehicles, motorcycles, and mopeds, have been recalled by the NHTSA.

The impacts of a recall or the threat of a recall are immense. Analysts estimate the financial blowback from Toyota’s 2010 gas pedal global recall could total more than $5 billion. This after a 10-month investigation by NHTSA safety officials absolved the electronics in Toyota vehicles saying driver error was to blame for most of the incidents.

In response to the NHTSA evaluation, Tesla has done something pretty interesting. It’s released an over-the air update that will enable vehicles with the Smart Air Suspension package to automatically adjust the suspension to higher levels at highway speed. Another software update expected this month will give the driver direct control of the air suspension ride height transitions.

In layman’s terms, over-the-air updates mean Tesla owners don’t have to trade in their old cars or take them to the shop to get upgrades installed. Instead, with the use of connected software, drivers get an automatic update.

In this way Tesla is addressing the threat of regulation and delivering product enhancements instantly and at minimal cost.

The use of software to get ahead of the game is not new to the auto industry. As manufacturers are hit with more and more regulation, software can play a key role. Software and sensor driven Engine Control Units (ECU), for example, enable manufacturers to develop engines that comply with Corporate Average Fuel Economy (CAFE) and Environmental Protection Agency (EPA) emissions standards.

Tesla, however, is leading the way with over-the-air updates – made possible with AT&T network chips that also allow for free Internet browsing, navigation, and streaming music.

The “air suspension” update may not satisfy NHTSA regulators and a physical product recall could still happen. But what started as a regulatory threat may in the end validate Tesla’s strategy. Investors seem to think so, Tesla shares were trading up $5.87, or 4.7 percent, to $127.43 in the first hour of trading after the news broke.

Learn more about the forces that are driving manufacturing transformation today and how those forces are likely to impact your industry.

Photo by ROBYN BECK/AFP/Getty Images

This entry was posted in Executive View, Transformation and tagged , , . Bookmark the permalink.

One thought on “Recall Reveals Why Tesla Will Come Out Ahead”

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s