Raphael Stevens

Starbucks earnings fell short of Wall Street’s expectations, but the company’s quarterly revenue topped estimates.
The company saw higher-than-expected costs throughout its supply chain, and a resurgence of Covid-19 meant paying more employees sick leave.
China’s same-store sales fell 14% in the quarter as the country reimposed travel restrictions on some areas.

Starbucks on Tuesday said higher costs are weighing on profits, leading the company to miss quarterly earnings estimates and cut its earnings outlook for fiscal 2022.
But investors were expecting a much gloomier forecast. Shares of the company were down as much as 5% in extended trading before rebounding after executives shared their revised projections. The stock was recently down less than 1%.

Here’s what the company reported for the quarter ended Jan. 2 compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

Earnings per share: 72 cents adjusted vs. 80 cents expected
Revenue: $8.05 billion vs. $7.95 billion expected

The coffee giant reported fiscal first-quarter net income of $815.9 million, or 69 cents per share, up from $622.2 million, or 53 cents per share, a year earlier.
Excluding items, Starbucks earned 72 cents per share, falling short of the 80 cents per share expected by analysts surveyed by Refinitiv. The company cited higher-than-expected costs throughout its supply chain and more employees using sick leave. Those problems are hitting the rest of the industry as well.

The Starbucks logo is displayed on a cup at a Starbucks store on October 29, 2021 in Marin City, California.
Justin Sullivan | Getty Images

Starbucks CEO Kevin Johnson said on the company’s earnings call that he is anticipating higher inflation for the rest of the year, too. Likewise, supply chain issues are also expected to be an issue. As a result, Starbucks is planning more price hikes after already raising prices in October and in January.
Net sales rose 19% to $8.05 billion, topping expectations of $7.95 billion. Its global same-store sales climbed 13% in the quarter.

Despite staffing issues, the company reported U.S. same-store sales growth of 18% from a year earlier and 12% on a two-year basis. Active 90-day users of its Starbucks Rewards program rose 21% to 26.4 million people.

The holiday season typically brings consumers back to its cafes for gift cards. During the quarter, shoppers spent more than $3 billion adding or reloading money to gift cards.
Outside the U.S., Starbucks saw weaker demand for its coffee. International same-store sales fell 3%, dragged down by China’s sluggish performance. Wall Street analysts surveyed by StreetAccount were forecasting international same-store sales growth of 3.3%.
In China, its second-largest market, same-store sales shrank by 14% in the quarter. The country reimposed travel restrictions on some cities as it faced another wave of Covid cases.
China’s recovery could be further delayed. Unlike the United Kingdom and U.S., China didn’t see cases of the omicron variant until early January, and its surge is just now starting. On top of that, the Winter Olympics, which are hosted in Beijing this year, mean the country is being particularly cautious to curb the spread.
For fiscal 2022, Starbucks updated its earnings outlook, citing increased costs due to omicron. It now expects GAAP earnings per share to fall by a range of 4% to 6% and adjusted earnings per share to rise by 8% to 10%. Last quarter, it said it was anticipating GAAP earnings per share to fall by 4% and adjusted earnings per share to rise by at least 10%.
For the fiscal year, Starbucks expects that its margins will see a hit of about 2% due to factors including inflation, the costs of training new baristas and Covid pay. By fiscal 2024, Starbucks predicts that its margins will be back to its long-term goal of 18% to 19%. The company had previously said it would return to its long-term margin target by fiscal 2023.
The company reiterated its revenue outlook of $32.5 billion to $33 billion.
Read the full earnings release here.

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The WHO’s Maria Van Kerkhove said there’s no indication the BA.2 omicron variant is any different from the original omicron in terms of severity.
Omicron generally doesn’t make people as sick as the delta variant, according to recent research.
Vaccines remain effective at preventing severe disease and death from omicron and all of its subvariants, Van Kerkhove said.
However, Danish scientists found that BA.2 is substantially more transmissible.

WHO Technical lead head COVID-19 Maria Van Kerkhove attends a news conference organized by Geneva Association of United Nations Correspondents (ACANU) amid the COVID-19 outbreak, caused by the novel coronavirus, at the WHO headquarters in Geneva, Switzerland July 3, 2020.
Fabrice Coffrini | Reuters

The World Health Organization on Tuesday said there’s no indication omicron’s new sister variant, BA.2, causes more serious infections than the original version, though initial data shows it’s more transmissible.
The WHO and other researchers around the world have found that omicron generally doesn’t make people as sick as the delta variant, though it does spread faster than previous strains of the virus and can evade some of the immune protection provided by vaccines.

Maria Van Kerkhove, the WHO’s Covid-19 technical lead, indicated on Tuesday that those findings likely hold true for the omicron sister variant, labeled BA.2 by scientists. Van Kerkhove said information is limited, but initial data indicates that BA.2 is “slightly” more transmissible than the original omicron variant, what scientists formally refer to as BA.1, which is currently the dominant version worldwide.
However, there’s no indication that BA.2 is any different from the original omicron in terms of severity, Van Kerkhove said, and the vaccines remain effective at preventing severe disease and death from omicron and all of its subvariants. The WHO is working with scientists around the world to track BA.2 infections and will share more information as it becomes available, she said.

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“We need people to be aware that this virus is continuing to circulate and it’s continuing to evolve,” Van Kerkhove said during a Covid update Tuesday in Geneva. “That’s why it’s really important that we take measures to reduce our exposure to this virus, whatever variant is circulating.”
BA.2 has become the dominant version of omicron in Denmark, outpacing the original version, BA.1. Danish scientists, in a study published this week, found that BA.2 is substantially more transmissible and is more adept at infecting people who are vaccinated or boosted.
However, vaccinated and boosted people are actually less likely to spread BA.2 once infected compared with people who have the BA.1 strain. The unvaccinated, on the other hand, transmit BA.2 more efficiently than the original omicron, likely due to a higher viral load, according to the study.

The Danish scientists said BA.2, like the original omicron, appears to be associated with milder infections than the more severe delta variant. “The combination of high incidence of a relative innocuous subvariant has raised optimism,” they wrote.
The WHO has repeatedly warned that new Covid variants will likely emerge as omicron spreads rapidly around the world. Van Kerkhove said last week the next variant will be more transmissible, but it’s an open question on whether it will be more severe.
The WHO labeled omicron, including its sublineages, a variant of concern in November. The BA.2 subvariant has not been separately categorized as such because it falls under omicron, the organization said.
“BA.2 is one of the sublineages of omicron, so BA.2 is omicron, and it is a variant of concern,” Van Kerkhove said Tuesday. “It’s in the family of the variants of concern around omicron.”

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Parents are anxiously awaiting the vaccine for younger children as the omicron variant sweeps across the nation, causing an unprecedented wave of infection over the past month.
Although children are at much lower risk of developing severe illness from Covid compared to adults, their hospitalizations with the virus have increased during the recent surge of infections, raising concerns about the long-term implications for kids’ health.

A student gets help with his mask from transitional kindergarten teacher Annette Cuccarese during the first day of classes at Tustin Ranch Elementary School in Tustin, CA on Wednesday, August 11, 2021.
Paul Bersebach | MediaNews Group | Getty Images

Pfizer and BioNTech asked the Food and Drug Administration on Tuesday to expand the use of their Covid-19 vaccine to most kids under 5.
The companies said the FDA requested that they start submitting data, which is being submitted on a rolling basis that fast-tracks the approval process, for the authorization of the first two doses of what will eventually be a three-dose vaccine for children six months through 4 years of age. Pfizer and BioNTech said data on the third dose will be completed and submitted to the FDA in the coming months.

Pfizer and BioNTech started submitting their application for emergency approval in response to the “urgent public health need” of younger children as the omicron variant has resulted in a spike in hospitalizations in this age group.
“As hospitalizations of children under 5 due to COVID-19 have soared, our mutual goal with the FDA is to prepare for future variant surges and provide parents with an option to help protect their children from this virus,” said Pfizer CEO Albert Bourla in a statement.
Bourla said kids under 5 will ultimately need a third dose to have the best protection against omicron and future Covid variants. By getting the first two-doses FDA authorized, parents can start getting their kids vaccinated while they wait for the third dose, Bourla said. Pfizer and BioNTech expect to complete their application for emergency approval of the first two-doses in the coming days.
Toddlers and kids under 5 years old are the last age group left that is not eligible for vaccination. The FDA is expected to fast track the approval process for 6-month to 4-year-olds like it has for other age groups. Once approved, pediatricians will be able to administer shots within a matter of days.
Parents are anxiously awaiting the vaccine for younger children as the omicron variant sweeps across the nation, causing an unprecedented wave of infection over the past month.

Although children are at much lower risk of developing severe illness from Covid compared to adults, their hospitalizations with the virus have increased during the recent surge of infections, raising concerns about the long-term implications for kids’ health.
“Sadly, we are seeing the rates of hospitalizations increasing for children zero to 4, children who are not yet currently eligible for Covid-19 vaccination,” Dr. Rochelle Walensky, director of the Centers for Disease Control and Prevention, told reporters in January.
White House chief medical advisor Dr. Anthony Fauci said last month that he hoped the FDA would authorize the vaccine for kids sometime in February. Fauci said at the time that younger children would likely need a three-dose vaccine.

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Pfizer amended its clinical trial in December to study a third shot after two doses of its 3 microgram vaccine did not produce an adequate immune response in children 2 to 4 years old. Adults receive two 30 microgram doses in their primary series of shots.
Pfizer’s vaccine researcher, Dr. Alejandra Gurtman, said last month the drugmaker planned to have the data for kids under 5 ready by the end of March or beginning of April. However, a group of 250 doctors sent a letter last month asking the FDA to cut red tape and authorize the 3 microgram dose for children. The doctors said it was unethical to not give parents the option to vaccinate younger children as the pandemic rages across the country.
“As children re-enter daycare centers, preschools, and other unavoidable group settings, we all know that the number of young children infected with omicron will soar exponentially, creating the largest health risk that kids have faced collectively throughout the entire pandemic,” the doctors wrote in their letter.
At least 1,000 children have died from Covid since the pandemic began in 2020, according to CDC data, and hospitals have seen more than 94,000 admissions of children with Covid, according to the data. The virus has infected more than 11.4 million children, representing 18.6% of all cases since the pandemic began, according to the American Academy of Pediatrics.
More than 6,000 children have developed multisystem inflammatory syndrome known as MIS-C, according to the CDC. MIS-C is a rare, but serious, condition associated with Covid that is characterized by the inflammation of multiple organ systems. At least 55 children have died from MIS-C, according to CDC data.
 Dr. Grace Lee, a professor of pediatrics at Stanford University, said the pandemic has burdened an entire generation of children, with the long-term impact yet to be seen.
“I also truly believe we have not yet addressed the long-term impact of Covid infection in children,” Lee told the CDC’s independent committee of vaccines advisors, which she chairs, earlier this month just before the agency cleared Pfizer boosters for 12- to 15-year-old children.
“I think we haven’t even scratched the surface of what we’re going to see,” Lee said.

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New Mexico Sen. Ben Ray Lujan, 49, is in the hospital after suffering a stroke and undergoing surgery, his office said.
Lujan, a Democrat, is “expected to make a full recovery,” his chief of staff, Carlos Sanchez, said in a statement.
Lujan’s recovery and presumed absence from Washington could complicate Democrats’ efforts to quickly appoint a successor to retiring Supreme Court Justice Stephen Breyer.

Sen. Ben Ray Lujan, D-N.M., attends a news conference outside the U.S. Capitol to demand greater accountability, transparency and oversight of federal agencies, at the U.S. border with Mexico on Tuesday, November 2, 2021.
Tom Williams | CQ-Roll Call, Inc. | Getty Images

New Mexico Sen. Ben Ray Lujan suffered a stroke last week and underwent brain surgery, his office revealed Tuesday.
Lujan, a Democrat, is currently hospitalized and is “expected to make a full recovery,” his chief of staff, Carlos Sanchez, said in a statement. The 49-year-old senator felt dizzy and fatigued early Thursday before being hospitalized and found to have suffered a stroke in his cerebellum, Sanchez said.

Lujan’s recovery and presumed absence from Washington could complicate Democrats’ efforts to quickly appoint a successor to retiring Supreme Court Justice Stephen Breyer.

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President Joe Biden said he expects to announce his nominee by the end of this month. The president has vowed to pick a Black woman to replace Breyer.
Democrats hold a razor-thin majority in the Senate, which is in charge of confirming new justices to the high court. The chamber is split 50-50 between Democrats and Republicans, with Vice President Kamala Harris wielding the tie-breaking vote.
As long as Lujan is absent, Democrats do not have enough members to allow them to confirm a Supreme Court justice on a party-line vote.

Breyer plans to step down in the summer, but he has suggested that the timing of his retirement will be predicated on whether or not his successor has been confirmed.

Lujan’s office declined to comment when asked by NBC News when they expect Lujan could return to work.
A White House spokesman did not immediately respond to questions from CNBC about whether Biden was aware of Lujan’s condition, or whether there was any sense at the White House of what Lujan’s recovery timeline might be.
Lujan “began experiencing dizziness and fatigue” early Thursday morning, Sanchez said. “He checked himself into Christus St. Vincent Regional Hospital in Santa Fe. He was then transferred to UNM Hospital in Albuquerque for further evaluation.”
The senator “was found to have suffered a stroke in the cerebellum, affecting his balance. As part of his treatment plan, he subsequently underwent decompressive surgery to ease swelling,” Sanchez said.
“He is currently being cared for at UNM Hospital, resting comfortably, and expected to make a full recovery. The Senator’s offices remain open and will continue providing constituent services to all New Mexicans without any interruption,” Sanchez said.
“The Senator and his family would like to thank the wonderful doctors and staff at both UNM Hospital and Christus St. Vincent Regional Hospital for their excellent care during this time. Senator Luján looks forward to getting back to work for the people of New Mexico. At this time, he and his family would appreciate their privacy, and ask for your continued prayers and well wishes,” the chief of staff said.
It takes weeks to even reach the hearing stage after the president submits his or her pick to the Senate. For modern nominees it has taken 41 days on average, according to the Congressional Research Service.
Despite a deeply polarized environment on Capitol Hill, the White House is optimistic that its nominee to the court will secure at least a few votes from Republicans during her confirmation.
But whether Republicans choose to cross the aisle on this vote depends in part on whether Democrats attempt to pass large swaths of Biden’s Build Back Better Act on a party line vote.
Should Lujan be unable to return to work, the state’s governor Michelle Lujan Grisham (no relation) would appoint his replacement. The governor is a Democrat, and she would all but certainly appoint a Democrat to Lujan’s seat.
On Capitol Hill, news of the senator’s stroke sent shockwaves through both parties, and quickly raised questions about why it took five days for his office to disclose his condition.
Sen. Dick Durbin, the Democratic Chairman of the Judiciary Committee, had been unaware of Lujan’s stroke until reporters told him about it Tuesday afternoon.
“Oh my God,” Durbin reportedly responded.

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The National Restaurant Association projects the foodservice industry will reach $898 billion in sales this year, up from $799 billion in 2021 and surpassing pre-pandemic sales levels from 2019 of $864 billion. However, when adjusted for inflation, sales in 2022 are projected to remain below pre-pandemic levels.
While sales are rebounding, the group expects it will be a year or more before conditions normalize.
Some 90,000 restaurants have shuttered, some permanently, as a result of the pandemic, the association reported.

Robert Freeman is hopeful Congress will replenish the Restaurant Revitalization Fund as his restaurant continues to struggle in the pandemic.
Kate Rogers | CNBC

Rising labor and food costs are chipping away at the restaurant industry’s hard-won gains and delaying recovery, according to the findings of a new report.
As the world enters the third year of the ongoing pandemic, restaurant operators are continuing to adapt to doing business in the face of an onslaught of challenges from labor to inflation and Covid variants. While sales are rebounding, a report from the National Restaurant Association suggests it will be a year or more before conditions return to normal as tens of thousands of restaurants have shuttered — some permanently.

The foodservice industry will reach $898 billion in sales this year, up from $799 billion in 2021 and surpassing pre-pandemic sales levels from 2019 of $864 billion, the group estimates in its “State of the Restaurant Industry Report” on Tuesday. However, when adjusted for inflation, sales in 2022 are projected to remain below pre-pandemic levels, they said. Much of last year’s gains were tied to higher prices as costs soared for operators.

Off to a ‘pretty sober start’

“2022 for the restaurant industry will remain another year of transition, and the year is off to a pretty sober start,” said Hudson Riehle, senior vice president of the association’s research & knowledge group. “When you survey restaurant operators, 76% across the country now say that business currently is worse than it was three months ago. It remains a fairly volatile and uncertain environment.”
While the group’s data show more than half of all operators believe it will be at least a year for business to return to normal, most operators, from fine dining to quick service, said they expect sales will either maintain or grow this year, exhibiting cautious optimism.
The report was compiled from a survey of 3,000 operators taken in November and December 2021.
At Robert Freeman’s restaurant in San Francisco, The Buena Vista Cafe, things are improving but are still a challenge. Sales dropped more than 60% in 2020, and rebounded to down 31% in 2021.

“It’s been a little like Coney Island — up and down on a rollercoaster,” Freeman said of the Covid variants and operational regulations that have shifted over the last two years.
On-premise businesses like Freeman’s are still short-staffed, the data show, with 7 in 10 saying they didn’t have enough employees to adequately staff their restaurants. The shortage was felt the most in family and fine dining categories. In all, the sector added back 1.7 million jobs in 2021, the data show.
The Buena Vista could use about a half dozen more workers at the moment, Freeman said. He is running shorter shifts to make things work.

Profits under pressure

While labor remains a top challenge, inflation is a close second, Riehle said. Food costs as a percentage of sales are up for 9 in 10 restaurant operators compared with pre-pandemic levels, and profits are down for 80% of operators compared with 2019. What’s more, 96% of operators experienced supply delays or shortages of key food or beverage items in 2021 — and these challenges will likely continue in 2022.
“There has been a rapid escalation of restaurant operators input cost in a time where consumer demand remains pretty weak, particularly for those on-site dining occasions,” Riehle said. “In this environment, the operator is extremely, extremely — not only careful about raising menu prices — but looking for more productivity and efficiency in the typical restaurant operation.”
Operators have also leaned on innovations and technology in a big way to weather the storm, from QR code ordering, delivery, outdoor dining parklets and alcohol-to-go. Operators across the industry say off-premises dining represented a higher proportion of average daily sales than it did prior to the pandemic, and many plan to increase investments in this part of the business in 2022.

Looking for a lifeline

The industry is also waiting on another lifeline. The National Restaurant Association is urging Congress to replenish the Restaurant Revitalization Fund, pointing to its own data that show half of restaurant operators that did not receive RRF grants from the $28.6 billion program feel it’s unlikely that they will stay in business beyond the pandemic without access. The group says $48 billion would resolve the 170,000 applications still pending for businesses with the Small Business Administration, which runs the program.
Freeman is among those who was initially told the cafe would receive a grant and then had the grant rescinded.
“I understand there wasn’t enough money, but why wasn’t it done on a pro-rata basis? You have $30 billion to spread around, that would have been so simple. Everybody would have gotten something, and no one would be in the position that I am,” he said.

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House Democrats have reupped calls for President Joe Biden to move ahead with the $555 billion in climate change investments already passed by the House as part of the Build Back Better Act.
The package has stalled for more than a month in the Senate after Sen. Joe Manchin, D-W.V., sank the bill by opposing it in December.
The climate portion of the legislation represents the largest-ever federal investment in clean energy.

Supporters demonstrate in favor of Build Back Better on the Senate Steps of the U.S. Capitol on Dec. 15, 2021.
Leigh Vogel | Getty Images

House Democrats have reupped calls for President Joe Biden to move ahead with the $555 billion in climate change investments already passed by the House as part of the Build Back Better Act, which has stalled for more than a month in the Senate.
The group of Democrats, who are running for reelection in swing districts, have demanded that the president quickly finalize clean energy and climate-change provisions that can pass the Senate in the coming weeks. They said that the urgency of the climate crisis requires immediate action.

“In the two months since the House passed the Build Back Better Act, mid-December tornadoes killed at least 78 people in Kentucky and late December wildfires destroyed 1,000 homes in Colorado,” the lawmakers wrote in a letter this week. “The time for you to work with the Senate to finalize and pass the strongest and most comprehensive version of the Build Back Better Act that can get 50 Senate votes is right now.”
The demands for climate action were led by Rep. Mike Levin, D-Calif., and signed by over 20 Democrats. They come after Sen. Joe Manchin, D-W.V., the swing vote in an evenly split Senate, sank the $2.2 trillion package by opposing it in December.
The climate portion of the legislation represents the largest-ever federal investment in clean energy and would help the U.S. get roughly halfway to meeting the administration’s pledge to curb emissions in half from 2005 levels by 2030, according to the nonpartisan analysis firm Rhodium Group.

U.S. Senator Joe Manchin (D-WV) walks between meetings at the Capitol in the midst of ongoing negotiations over the Build Back Better bill, which aims to bolster the social safety net and fight climate change, in Washington, U.S. December 14, 2021.
Jonathan Ernst | Reuters

The climate investments in Build Back Better largely come through tax incentives for low-emissions energy sources.
The bill’s biggest spending components include 10-year tax credits to expand and accelerate investments in renewable power, including wind, solar and nuclear. It has a proposal to provide an electric vehicle tax credit of up to $12,500 for vehicles made at a unionized factory in the U.S. It would invest in new research for carbon capture technology and create a Civilian Climate Corps to spur job growth and conserve public lands, among other things.

 “We remain optimistic and are more determined than ever to ensure that a transformational package can pass. Failure is not an option,” said Tiernan Sittenfeld, the senior vice president for government affairs at the League of Conservation Voters. “When it comes to the climate crisis, time is not on our side.”
Every Senate Democrat would need to support the bill for it to get to president’s desk and become law. Meanwhile, every congressional Republican has opposed the plan, arguing it would worsen the highest inflation the U.S. has seen in decades.
Democrats’ hopes of passing any legislation on their own in the near future took a hit Tuesday when the office of Sen. Ben Ray Lujan announced the New Mexico Democrat underwent surgery after suffering a stroke. Lujan is expected to make a full recovery.
Earlier this month, Biden said he will likely have to break up his plan to invest in social programs and climate policy, and that he believes he can win support for spending to combat climate change.
“I’m confident we can get pieces, big chunks of the Build Back Better law signed into law,” the president said during a press briefing. “So I think we can break the package up, get as much as we can now and come back and fight for the rest of it.”
Manchin, who comes from the coal-rich state of West Virginia and profits from a coal consulting business he founded, has indicated he is open to passing standalone climate provisions outside of the BBB legislation, including production tax credits for the solar and wind sectors.

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Manchin previously rejected the bill’s proposed clean electricity program. The initial key component of the president’s framework would have incentivized energy companies to shift away from fossil fuels to clean energy and penalized companies that did not.
Manchin also opposed a proposed fee on emissions of methane, a potent planet-warming gas, as well as a provision that would provide tax credits to some electric vehicle consumers.
The senator on Tuesday told NBC News that there are no formal talks underway on the Build Back Better bill.
“We always start at scratch, but things have changed since then,” Manchin said.
White House press secretary Jen Psaki said last week that the administration has not set a deadline to pass the bill. The country’s last effort to pass climate legislation was in 2009, when congressional Democrats failed to approve a carbon pricing system under former President Barack Obama.
The president and other world leaders have pledged to curb greenhouse gas emissions enough to keep global temperature increases from surpassing the 1.5 degrees Celsius level inscribed in the 2015 Paris Accord. Scientists have warned the world has already warmed about 1.1 degrees Celsius above preindustrial levels and is on track to see global temperatures rise 2.4 degrees Celsius by the end of the century.
— CNBC’s Jacob Pramuk contributed reporting

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Tesla is recalling beta software from more than 53,000 cars that includes a setting that lets cars roll past stop signs.
The NHTSA says the feature “can increase the risk of a crash.”
CEO Elon Musk has repeatedly touted Tesla as the carmaker of the future, but currently its vehicles are limited to driver-assistance features, meaning motorists must remain attentive with hands on the wheel.

A Tesla dealership in Colma, California, on Wednesday, Jan. 26, 2022.
David Paul Morris | Bloomberg | Getty Images

Tesla will recall software from 53,822 of its Model S, X, 3 and Y vehicles in the U.S. to eliminate a feature that let cars automatically roll past stop signs, according to records published Tuesday by the National Highway Traffic Safety Administration.
These cars feature a relatively new version of the company’s so-called Full Self-Driving Beta (or FSD Beta) software.

Newer versions of FSD Beta (2020.40.4.10 or later), which are subject to the recall, give drivers a “rolling stop” function that lets their cars automatically “roll through an all-way stop intersection without first coming to a stop,” the NHTSA notices said, which “can increase the risk of a crash.”
Tesla wrote in its communications to NHTSA, “As of January 27, 2022, Tesla is not aware of any warranty claims, field reports, crashes, injuries or fatalities related to this condition.”
The No. 1 electric vehicle maker will remove these features through a free over-the-air software update, meaning customers don’t have to take the cars to a store or service center to address the problem.
The FSD Beta program gives Tesla drivers early access to new features that aren’t completely debugged yet, including “autosteer on city streets,” which let drivers automatically navigate around complex and crowded urban environments without moving the steering wheel with their own hands. Despite the name, FSD Beta does not make Tesla vehicles autonomous.
Tesla owners who buy the company’s $12,000 premium driver assistance system, or subscribe to it for $199 a month, can join the FSD Beta program. They need to maintain a high-driving safety score, as determined by Tesla software, before gaining access. The company does not require FSD Beta drivers to have any safety training or professional certifications to use the unfinished features on public roads in the U.S.

On Jan. 26, in its most recent earnings update, Tesla revealed that it has expanded this controversial testing program to around 60,000 vehicles in the country.
Meanwhile, government agencies are increasing scrutiny of the Telsa program. For example, NHTSA is investigating whether FSD Beta may be in part or fully to blame for a Model Y collision that occurred in Brea, Calif., in November 2021, and the California DMV is reviewing the company’s use of the term “Full Self-Driving” to describe and sell it to customers.
On the recent earnings call, CEO Elon Musk said, “Over time, we think Full Self-Driving will become the most important source of profitability for Tesla.”
“My personal guess,” he added, “is that we’ll achieve Full Self-Driving this year at a safety level significantly greater than a person. So the cars in the fleet essentially becoming self-driving via software update, I think, might end up being the biggest increase in asset value of any asset class in history. We shall see.”
Rodney Brooks, professor emeritus in robotics at the Massachusetts Institute of Technology, doubts that timing, though. “If this was going to happen in three years, let alone this year, they’d have to have driverless cars going around today picking people up in a demo. There’s not even a demo,” Brooks said.
Musk has been promising shareholders and Tesla fans an autonomous vehicle since at least 2016, but currently its vehicles are limited to driver-assistance features, meaning motorists must remain attentive with hands on the wheel.
The company did not respond to a request for comment on the recall, or the 6,178 vehicles referenced in its fourth-quarter shareholder deck that were not accounted for in the notice that Tesla filed to NHTSA on Jan. 27.
Tesla shares were unbowed by news of the software recall, however; they closed Tuesday roughly flat at $931.25.

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