Tesla Drops After Fire-Risk Recall of 10,500 Powerwall 2 Units

Tesla Inc. shares fell in premarket trading on Friday, extending losses from the previous session, after the electric vehicle and energy company announced a recall of approximately 10,500 Powerwall 2 home battery systems due to fire and burn hazards. The recall, disclosed Thursday by the U.S. Consumer Product Safety Commission, follows 22 customer reports of overheating incidents, including five fires that resulted in minor property damage.

While no injuries have been reported, the safety issue highlights potential vulnerabilities in Tesla’s growing energy storage business, which has become a significant revenue driver for the company.

How Defective Battery Cells Triggered Tesla’s Powerwall 2 Recall

The recall affects Powerwall 2 systems that contain defective lithium-ion battery cells from a third-party supplier, though Tesla has not identified the specific supplier. According to the CPSC notice, these battery cells can cause units to stop functioning during normal use, potentially resulting in overheating, smoke, or flames that pose death or serious injury risks.

The Powerwall 2 is a residential energy-storage unit designed to integrate with solar-panel systems, storing electricity for self-consumption, cost optimization, and backup power during grid outages.

Tesla has responded by remotely limiting the charge on affected units to minimize risk while arranging free replacements for all U.S. customers. The company emphasized in a separate notice that the issue does not affect newer Powerwall 3 systems.

The recall comes at a time when Tesla’s Energy division has emerged as a major growth engine, with revenue jumping 44% to $3.42 billion in the third quarter of 2025, representing approximately one-quarter of Tesla’s overall revenue as of the end of September.

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TSLA Slides 3% in Premarket as Recall Pressure Adds to Weekly Losses

Tesla shares traded at $387.90 in premarket activity at 6:29 AM EST on Friday, down $14.09 or 3.51%, following a 6.64% decline to $401.99 at Thursday’s close. The stock has faced significant pressure this week amid a broader market sell-off, with tech stocks particularly hard hit due to reduced expectations for a December Federal Reserve interest rate cut and inflation concerns.

Tesla shares are now down 0.46% year-to-date, though they maintain a 21.73% gain over the past year.

The recall announcement compounds recent challenges for the electric vehicle maker, which carries a market capitalization of $1.34 trillion and trades at a trailing price-to-earnings ratio of 277.23. Analyst sentiment remains mixed, with an average price target of $392.05, slightly below the current trading level. Wedbush analyst Dan Ives, one of Tesla’s most bullish supporters, reiterated an “Outperform” rating with a $600 price target on November 7, maintaining his positive long-term outlook despite near-term headwinds.

The recall draws attention to Tesla’s battery-cell supply chain as its energy-storage business plays an increasingly critical role in the company’s expansion beyond electric vehicles.

Disclaimer: The author does not hold or have a position in any securities discussed in the article. All stock prices were quoted at the time of writing.