Tesla (TSLA) - Get Report said it was recalling 15,000 of its Model X SUVs in North America over a potential steering issue that can lead to a loss of power steering assist, and in turn a higher risk of a crash.
The Associated Press reported that the National Highway Traffic Safety Administration (NHTSA) and Transport Canada have both issued recalls on the high-end SUVs, saying aluminum bolts that attach the electric power steering gear assist motor to the gear housing may corrode and break, causing a reduction or complete loss of power steering assist in some 2016 model year vehicles.
There are no known crashes or injuries associated with the issue. The recall covers 14,193 U.S. vehicles and 843 in Canada. Tesla will arrange for the replacement of the mounting bolts and also will replace the steering gear if needed, Transport Canada said.
The recall comes as Tesla rapidly finds itself grappling with a growing list of other issues, most notably the coronavirus, now officially called Covid-19, which has impacted its production facilities in China and already has begun to impact sales of its electric vehicles.
Last year, China reduced or eliminated government incentives for electric car purchasers, prompting sales to sputter. Following right behind, however, has been the coronavirus epidemic, which has halted sales of all cars.
The Chinese automakers’ association, CPCA, predicted sales of new automobiles could fall by as much as 50% in February, following a terrible January that saw sales plunge 20%. EV sales alone fell some 54% last month, their 19 consecutive monthly drop, according to the CPCA.
It also comes as the electric vehicle giant announced plans to issue another $2 billion in stock - even as the company’s share price continues to hit successive new records, pushing its market cap above the likes of Ford (F) - Get Report and Toyota (TM) - Get Report.
The confluence of events - and the revelation of another $2 billion worth of shares hitting the market - is spurring some second thoughts among Wall Street analysts who have been collectively bullish on Tesla’s one-way trajectory higher.
Some 45% of analysts who issue research on Tesla now have either a sell or underweight recommendation, according to FactSet, the highest percentage in Tesla's nearly-10-year history as a publicly company.
Jed Dorsheimer with Canaccord Genuity told clients earlier this month that his team is "taking our foot off the accelerator" and downgrading the stock to hold from buy in part because of the stock's run-up but also because of concerns about the impact of the coronavirus.
"Just as we observed a clear buy signal coming into 2020, we see the risk of China's coronavirus as a clear headwind to the Shanghai facility, suggesting a more pragmatic position," said Dorsheimer.
The mean one-year price target among analysts is $495.04, roughly 35% below Tesla’s closing share price of $767.29 on Wednesday.
Tesla stock was down 4.13% at $735.62 in premarket trading on Thursday.