Tesla Inc. shares experienced a decline in premarket trading on Friday, extending losses from the previous session. This downturn followed the electric vehicle and energy company's announcement of a recall affecting approximately 10,500 Powerwall 2 home battery systems due to potential fire and burn hazards. The recall, disclosed by the U.S. Consumer Product Safety Commission, comes after 22 customer reports of overheating incidents, which included five fires that resulted in minor property damage. Although no injuries have been reported, this safety issue underscores potential vulnerabilities within Tesla’s expanding energy storage business, a sector that has become a significant contributor to the company's revenue.
Details of the Powerwall 2 Recall
The recall specifically targets Powerwall 2 systems containing defective lithium-ion battery cells sourced from an unidentified third-party supplier. According to the CPSC notice, these faulty battery cells can lead to units ceasing to function during normal operation, creating a risk of overheating, smoke, or flames, which could result in death or serious injury. The Powerwall 2 is designed as a residential energy-storage solution that integrates with solar-panel systems, enabling the storage of electricity for self-consumption, optimizing costs, and providing backup power during grid outages.
In response to the recall, Tesla has implemented a measure to remotely limit the charge on affected units to mitigate risks. The company is also arranging for free replacements for all affected customers in the U.S. Tesla has clarified that this issue does not impact their newer Powerwall 3 systems.
Impact on Tesla's Energy Division and Stock Performance
This recall occurs at a critical juncture for Tesla's Energy division, which has been a primary growth engine for the company. In the third quarter of 2025, revenue from this division surged by 44% to $3.42 billion, accounting for roughly one-quarter of Tesla's total revenue as of the end of September.
Tesla shares were trading at $387.90 in premarket activity at 6:29 AM EST on Friday, marking a decrease of $14.09, or 3.51%. This followed a significant drop of 6.64% to $401.99 at the close of trading on Thursday. The stock has faced considerable downward pressure throughout the week, influenced by a broader market sell-off, particularly impacting tech stocks. This sentiment is partly driven by diminished expectations for a December Federal Reserve interest rate cut and ongoing inflation concerns.
Year-to-date, Tesla shares have seen a slight decline of 0.46%, although they still maintain a 21.73% gain over the past year. The recall announcement exacerbates recent challenges for the electric vehicle manufacturer, which holds a market capitalization of $1.34 trillion and trades at a trailing price-to-earnings ratio of 277.23. Analyst sentiment regarding the stock remains divided. The average price target stands at $392.05, slightly below the current trading level. Notably, Wedbush analyst Dan Ives, a prominent Tesla supporter, reiterated an “Outperform” rating with a $600 price target on November 7, maintaining a positive long-term outlook despite current headwinds.
The recall brings renewed attention to Tesla's battery-cell supply chain, emphasizing the increasing importance of its energy-storage business as the company diversifies its operations beyond electric vehicles.