In September 2025, transport authorities in Australia and New Zealand announced recalls for the 2025 Tesla Model Y. In Australia, 7,301 vehicles are affected, while New Zealand has not disclosed specific numbers.
The issue applies to Tesla vehicles running software versions earlier than 2025.26.6 and is linked to a dormant firmware function. According to Australia’s transport department:
“Due to a software issue, the driver’s side window’s automatic protection system may not operate as intended and result in the window closing with excessive force on any obstruction, such as a body part.”
This case shows how Environmental, Social and Governance (ESG) risks in the automotive industry now extend beyond emissions or supply chains. Software safety has become a material governance, compliance and investor risk.
A Growing Pattern of Tesla Software Recalls
The Tesla Model Y recall underscores a broader industry trend - software-related recalls are becoming systemic.
🔹In early 2025, hundreds of Tesla Model Y and Model 3 vehicles in Australia were recalled due to software faults affecting power steering
🔹In 2022, Tesla recalled over one million cars in the United States for the same window safety defect now identified in Australia and New Zealand
🔹Since 2021, most Tesla recalls in Australia and New Zealand have been linked to software flaws, not mechanical failures
From an ESG perspective, this trend highlights the importance of data transparency, investor trust, and risk monitoring. Regulators and investors alike are focusing on whether automotive companies have adequate systems in place to manage emerging software safety risks.
Looking Ahead for the Automotive Industry
The definition of vehicle safety is shifting. Traditional focus on engines, brakes, and crash tests is expanding to include software reliability as a critical safety factor.
🔹A single coding error can create material risks, especially in vehicles with autonomous driving capabilities that depend on real-time software decisions
🔹Manufacturers and regulators must strengthen software testing, compliance frameworks, and independent oversight
🔹Transparent reporting standards are essential to reassure both regulators and investors
Giving software safety the same priority as traditional mechanical safety checks is not just a consumer protection issue - it is a material governance and reputational risk that directly impacts long-term value.
For investors, this reinforces the importance of monitoring how companies manage these risks. Software safety is a key factor in assessing resilience, accountability, and long-term value.
Key Takeaways
1. Software is a material ESG risk.
Most Tesla recalls in recent years have stemmed from software code rather than hardware components.
2. Governance and compliance are critical.
Automakers must establish formal processes to test, document, and oversee automotive software.
3. Transparency builds trust.
Investors and regulators expect alignment between public safety claims and operational practice, supported by verifiable data.
4. Investor implications.
Monitoring how companies manage software risks is now central to assessing ESG alignment, resilience, and long-term performance.
