Shares of Toyota Motor (TYO: 7203) declined Friday after the Japanese carmaker announced it is recalling a portion of its all-electric vehicles that were launched two months ago due to reports of wheels coming loose and the risk of them falling off.

The company said Thursday it will recall 2,700 bZ4X SUVs globally. The Toyota-backed Japanese automaker, Subaru Corp. also announced it was recalling roughly 2,600 Solterra vehicles – a model that was developed in collaboration with Toyota. Solterra and bZ4X also use a number of the same components.

Toyota’s recall is the latest in a series of challenges the carmaker has been facing lately after reducing production output multiple times this year due to global chip crunch and supply constraints.

Furthermore, the company is also facing mounting pressure from its shareholders due to its sluggishness in developing battery electric vehicles (BEVs).

“It’s embarrassing,” said CLSA analyst Christopher Richter. “People have waited so long for Toyota to get a mass-market battery-electric vehicle … and just a few weeks after they get it in the market there’s a recall.”

Richter added that it wasn’t “an indictment of the new electric vehicle system” given that the reason behind the recall is a mechanical problem that shouldn’t cost too much to fix.

While no accidents involving the bZ4X were reported, Japan’s safety regulator said there is a risk of hub bolt loosening during sharp turns and unexpected braking, which could ultimately result in a wheel falling off the car.

The issue was first reported among U.S. drivers, according to a statement by Japan’s Ministry of Transport representative.

Toyota and Subaru officials did not say how quickly they can resolve the problem and continue with the deliveries as the cause of the issue is yet to be determined.

After being praised by environmentalists for its beloved hybrid Prius model, Toyota is now facing criticism for its slowness to phase out its gas-powered vehicles. The carmaker responded to the critics saying it is important to offer a mix of powertrains in order to meet different client needs.

Uber Stake Cut in Half

Meanwhile, the Japanese car manufacturer announced Thursday it has cut its stake in Uber Technologies in half after the U.S. ride-hailing company divested its self-driving business.

“The development of vehicles related to automated driving was one of the main objectives of Toyota’s investment,” said Toyota representative Shiori Hashimoto, who added that the carmaker still plans to continue collaborating with Uber.

As of March-end, Toyota held roughly 5.13 million shares in Uber, compared to 10.25 million shares it held in 2021, according to the company’s regulatory filing. Its current stake in the ride-hailing giant is worth about 22.4 billion yen ($165.51 million).

The world’s largest carmaker by volume purchased $500 million worth of Uber shares in 2018, which marked the beginning of a partnership between the two companies who joined forces to develop autonomous driving cars.

But two years later, Uber sold its self-driving business to Aurora Innovation to meet its profitability targets. Earlier this year, Aurora said it had started testing its self-driving cars with Toyota with two safety operators and no passengers.

Automakers that are developing self-driving vehicles continue to face pressure to generate substantial revenue returns from their gigantic engineering investments, however, the companies still face numerous technological hurdles, making it difficult to scale up their fleets.

In March, Toyota said its Sienna minivans, powered by Aurora’s autonomous driving system, will be tested on highways and city streets in the Dallas-Fort-Worth area and will conduct trips to the airport.

Aurora bought Uber’s self-driving business ATG for $4 billion.

Summary

Toyota shares are trading lower after the company was forced to recall its EV units, a development described as “embarassing.”