Tesla Recalls 2,700 Model X Vehicles; Shares Volatile

Shares of Tesla Motors Inc (NASDAQ: TSLA) were volatile on Monday afternoon following the company's announcement of a voluntary recall of 2,700 Model X SUVs.

Tesla notified its customers of an issue with the third row seat. Specifically, the company said an internal seat strength test that was conducted in Europe showed that the recliner in the third row seat unexpectedly slipped. The recliner is the locking hinge that allows the third row seat to fold forward.

Tesla added that if a recliner were to slip during a crash, the seat could move forward.

The stock was trading around $256 when the press release hit, immediately sending shares more than $5 lower. The stock traded recently at $249.36, down about 0.3 percent on the day.

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Despite the recent flaw discovery, Tesla's tests in North America showed no signs of a failure. Moreover, there are no reports of a third row seat slipping in customer vehicles. Nevertheless, the company felt it necessary to undertake the precautionary measure and and all Model X vehicles are expected to be completed over the next five weeks.

"It's actually with the leverage of weight in the seat pulling it forward. So this would be an example of a front crash where the weight of the passenger seat belted to that seat could cause that latch to fail," said Jon McNeill, president of sales and service at Tesla.

Tesla said in a press release on April 4 that it delivered 2,400 Model X vehicles in the first quarter. The company's figures in its Model X recall suggest that many SUVs that were produced in the second quarter were also included in the recall.

This is the first recall for the Model X. In November 2015, Tesla recalled all Model S vehicles delivered before November 19 "over an issue related to the front seat belt, which could prevent it from functioning properly."