Tesla Recalls 10,500 Powerwall 2 Batteries Over Fire Risk—Two Months After Australia Did The Same

Tesla is recalling approximately 10,500 Powerwall 2 home battery systems in the United States due to defective lithium-ion battery cells that can overheat, smoke, or ignite, the U.S. Consumer Product Safety Commission announced today. The recall follows 22 reports of overheating incidents including five fires that caused minor property damage, though no injuries have been reported.

The timing raises uncomfortable questions for Tesla: Why did the company wait two months after issuing a similar recall in Australia to warn American customers about the same defect?

What’s Being Recalled and Why

The recall affects Powerwall 2 AC battery systems sold between November 2020 and December 2022 for approximately $8,000 each. According to the CPSC:

“The lithium-ion battery cells in certain Powerwall 2 systems can cause the unit to stop functioning during normal use, which can result in overheating and, in some cases, smoke or flame and can cause death or serious injury due to fire and burn hazards.”

Tesla has received 22 reports of affected units overheating, including six incidents involving smoke and five actual fires. While the fires resulted in minor property damage, the CPSC warns the defect “can cause death or serious injury due to fire and burn hazards.”

The Powerwall 2 is a residential energy storage system that integrates with solar panels, storing excess electricity for use during peak demand periods or power outages. With 14 kWh of lithium-ion battery capacity, these wall-mounted units have been installed in thousands of American homes as part of the residential solar boom.

Tesla’s Response and Replacement Process

Tesla is replacing all affected Powerwall 2 units free of charge. The company has already remotely discharged most affected systems that are online to reduce fire risk while awaiting physical replacement. According to Reuters, Tesla blamed the issue on “a third-party battery cell defect” but did not identify the supplier.

Powerwall owners should ensure their system is online and check the Tesla app for recall notifications. Tesla will coordinate directly with affected customers and their original installers to schedule removal of existing units and installation of replacements. The company is also considering compensation for lost energy savings on a case-by-case basis.

Customers can contact Tesla’s support team at powerwallsupportna@tesla.com or call 877-961-7652 Monday through Friday, 8 a.m. to 5 p.m. PT. Additional information is available at Tesla’s Powerwall support page.

Australia Recalled the Same Units in September

This isn’t the first time these specific Powerwall 2 units have been recalled. On September 16, 2025, Australia’s consumer watchdog issued a recall for Powerwall 2 systems sold between November 2020 and June 2022—the same production window as the U.S. recall.

The Australian recall notice stated that Tesla had “received reports of Powerwall 2 units with the affected battery cells smoking or emitting flames, resulting in minor property damage.” According to TechCrunch, the recall “expands to US” after the Australian action, suggesting Tesla knew about the international scope of the problem two months before warning American customers.

That two-month gap raises serious questions about why U.S. customers weren’t immediately warned when the same defect was identified in Australia—especially given that all Powerwalls are manufactured at Tesla’s Nevada Gigafactory and shipped globally.

Powerwall 3 Not Affected

Tesla emphasized that the recall does not affect owners of its newer Powerwall 3 model, which uses a different battery cell supplier and design. According to CNBC, Tesla’s website explicitly states that “all affected units are being replaced at no cost to customers” and that Powerwall 3 systems do not have the defect.

The Powerwall 3 launched in late 2023 with 13.5 kWh capacity, higher power output (11.5 kW versus the Powerwall 2’s 5 kW), and a built-in solar inverter. Tesla stopped taking orders for Powerwall 2 in late 2024.

Impact on Tesla’s Energy Business

The recall comes at a particularly awkward moment for Tesla. The company’s energy storage division—which includes both residential Powerwalls and utility-scale Megapacks—has been the bright spot in Tesla’s financials as vehicle sales decline globally.

According to CNBC, “Tesla’s biggest growth engine in the third quarter of 2025 came from its energy division, which sells Powerwalls. Tesla Energy saw revenue jump 44% to $3.42 billion in the third quarter, and as of the end of September, its energy segment represented about one-quarter of Tesla’s overall revenue.”

Tesla shares fell more than 7% on Thursday following the recall announcement, reflecting investor concern about safety issues in what’s supposed to be the company’s success story.

EVXL’s Take

Tesla’s two-month delay between the Australian and U.S. Powerwall recalls reveals a troubling pattern we’ve documented extensively at EVXL: the company’s willingness to stretch timelines when it comes to safety issues that threaten profitable business segments.

Remember, Tesla’s energy division has been the lifeline keeping the company afloat while automotive revenue collapsed. In Q1 2025, energy revenue hit $2.73 billion (up 67%) while automotive revenue dropped 20%. By Q2 2025, energy reached a record $3.04 billion, up 176% year-over-year. And in Q3 2025, energy storage deployments grew 81% to 12.5 GWh. This is supposed to be Tesla’s redemption story while Elon Musk’s political antics tank vehicle sales.

Now we learn that this shining energy business has been quietly dealing with battery fires for potentially years. According to Electrek’s reporting, a source familiar with Tesla’s Powerwall service claims “this issue has been known to Tesla for years” and that the company even built “thermal response trailers to take around the country to address Powerwalls that were starting to overheat.” The first U.S. fire reportedly occurred in 2023.

If true, that means Tesla knew about systematic overheating issues potentially two years before today’s recall—and only acted after Australian regulators forced their hand in September. Why weren’t U.S. customers warned immediately when the Australia recall dropped? These are the same units from the same production runs manufactured at the same Nevada factory.

This fits an uncomfortable pattern we’ve been tracking. Just weeks ago, we covered Tesla’s recall of nearly 13,000 Model Y and Model 3 vehicles for battery contactor defects that cause sudden power loss—a hardware failure requiring physical repairs during the exact period when Tesla was rushing cheaper Standard trims to market after the tax credit expired. Before that, every single Cybertruck built—all 63,619 units—was recalled for lighting violations, and the Cybertruck’s sticky accelerator pedal debacle in April 2024 revealed that Tesla used soap as a lubricant during assembly.

The broader context is even more concerning. We’ve been documenting a wave of battery safety issues across the EV industry. Li Auto just recalled 11,411 Mega EVs in China after an October fire in Shanghai, admitting their cloud monitoring system detected problems four hours before the fire but couldn’t prevent it because staff had never encountered a non-collision thermal event. BMW recalled 70,852 EVs for software glitches causing sudden power loss. Even Tesla’s own Cybertruck has caught fire while towing, sparking a half-acre grass fire in Colorado.

But Tesla’s case is particularly frustrating because the company has the technical capability to handle this better. Tesla pioneered over-the-air updates and remote diagnostics. They can remotely discharge these Powerwalls to reduce fire risk. They have the infrastructure to identify affected units instantly. Yet somehow it took two months after Australia’s recall to warn American customers with potentially the same defective batteries mounted on their garage walls?

The unnamed “third-party battery cell defect” excuse doesn’t hold much water either. Tesla sourced cells from multiple suppliers during this period, with CATL and LG Energy Solution as major providers. But Tesla chose those suppliers, validated their manufacturing processes, and integrated the cells into products sold for $8,000 each. “It was the supplier’s fault” rings hollow when you’re selling premium home energy systems and positioning yourself as a technology leader.

The real question is whether Tesla’s breakneck scaling of its energy business—the division that was supposed to validate the company’s diversification strategy—compromised quality control. These recalled Powerwalls were manufactured during 2020-2022, a period when Tesla was aggressively ramping Powerwall production and pricing the units at premium levels to capitalize on the residential solar boom.

For Tesla’s 10,500 U.S. customers with affected Powerwalls, the recall process should be straightforward: free replacement, remote discharge to minimize immediate risk, and potential compensation for downtime. But the bigger trust issue isn’t going away. When safety problems emerge in Tesla’s “success story” energy division—and the company delays U.S. warnings for two months after Australia identifies the same issue—it raises fundamental questions about Tesla’s priorities.

What do you think? Should regulators investigate why Tesla waited two months to expand this recall to the U.S.? Share your thoughts in the comments below.