Tesla Airbag Recall: Tesla and 11 Other Car Makers Impacted by NHTSA Recall Request

Key takeaways

• The NHTSA wants to recall millions of airbags made by ARC Automotive
• A dozen car companies would be impacted by the recall, which spans cars from 2000–2018
• Some of the car makers’ share prices closed slightly lower on Tuesday, but Tesla made a 4.7% gain thanks to another reason

There’s another potentially massive airbag recall on the horizon. The federal motor safety agency has concluded its nearly decade-long investigation into ARC Automotive and determined the company’s airbags, spanning almost two decades, are defective.

The decision impacts a dozen car manufacturers, including Tesla, BMW and Ford. ARC hotly denies the findings and has a public forum in October to clear its name, but if the recall goes ahead, it will impact millions of vehicles — and, potentially, car makers’ finances. Here’s the latest.

What’s happening with an airbag recall?

The National Highway Traffic Safety Administration (NHTSA) has confirmed over 52 million airbag inflators made by ARC Automotive and Delphi are defective and need to be replaced.

“These airbag inflators may rupture when the vehicle’s airbag is commanded to deploy, causing metal debris to be forcefully ejected into the passenger compartment of the vehicle. A rupturing airbag inflator poses an unreasonable risk of serious injury or death to vehicle occupants,” the NHTSA said in a statement.

The announcement rounds off an eight-year investigation into rupturing airbags made by ARC. The manufacturer, which rejects the NHTSA’s demand for a recall, can plead their case at a hearing on October 5.

12 car makers are impacted by the potential recall, including Tesla, BMW, Ford and Volkswagen. Some of these automakers have already made recalls to address the possible safety defects once the investigation into ARC’s airbags first opened in 2015.

If it goes ahead, the recall will affect around 41 million driver and passenger airbags made by ARC between 2000 and January 2018. Delphi Automotive no longer exists as it was acquired by Autoliv, who may not hold legal liability for the defective airbags. Delphi, under license with ARC, is thought to have produced around 11 million affected inflators.

Was there any impact on stock prices?

The recall news mildly impacted some of the car makers’ share prices. BMW opened on Tuesday 0.8% lower, though regained its losses to close flat. Ford closed 0.25% down, and General Motors finished Tuesday’s trading session 0.18% lower.

Tesla stock was unaffected by the news on Tuesday, with the stock gaining 4.7% thanks to solid sales in China for the EV maker in August. Tesla has had its own recent run-ins with the NHTSA after a so-called ‘Elon mode’ was discovered in Tesla software that allowed users to use the self-driving feature without being reminded to hold onto the steering wheel.

The bottom line

This is a serious safety issue that could cost a dozen car makers millions to take care of — it wouldn’t be a surprise to see ARC Automotive drowning in litigation, should the recall happen.

We suspect until official news comes from the NHTSA that ARC Automotive hasn’t got a leg to stand on and the recall needs to go ahead, there won’t be much movement in the share prices on this matter until then.