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Tesla is recalling more than 80,000 cars in China. Investors will be watching to see if there will be any reputational damaged to the U.S. giant.
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Tesla is recalling more than 80,000 cars in China over software and seatbelt issues, the Chinese market regulator said Friday.

The U.S. electric car giant is recalling a total of 67,698 imported Model S and Model X vehicles produced between Sept. 25, 2013 and Nov. 21, 2020, China’s State Administration for Market Regulation said.

The recall of these models is due to a software issue that affects the battery management system of the cars. Tesla will upgrade the software on these vehicles free of charge.

Elon Musk’s automaker is also recalling 2,736 imported Model 3 vehicles produced between Jan. 12, 2019 and Nov. 22, 2019 as well as 10,127 of the China-made version of this car due to a potentially faulty seatbelt.

Tesla will check the seatbelts on the affected cars, the regulator said.

Tesla was not immediately available for comment when contacted by CNBC.

Investors will be watching for any fallout for Tesla in China from the recall. The market is increasingly competitive with domestic challengers from Warren Buffett-backed BYD to upstarts like Nio and Xpeng.

“Recalls are always costly and often get amplified in a way that can be reputationally damaging — especially true now as the market has become hyper-competitive and Tesla’s backlog has been shrinking,” Bill Russo, CEO at Shanghai-based Automobility, told CNBC.

“This recall mostly impacts imported models (S and X), so it can be managed if they get out in front of it.”

China is one of Tesla’s most important markets. The company has a major production factory in Shanghai and has been selling a record number of China made-cars in recent months.

But Tesla also faces rising competition in China as companies like Xpeng, Nio and Li Auto ramp up new car releases for 2023 in a bid to challenge the U.S. electric automaker’s dominance.

Last month, Tesla slashed the price of Model 3 and Model Y vehicles in China after raising them earlier this year due to higher material costs.

It is not the first time that Tesla has had to recall cars in China. In May, the U.S. firm recalled more than 100,000 cars due to an overheating issue.

— CNBC’s Sam Vadas contributed to this report.