Please ensure Javascript is enabled for purposes of website accessibility

Tesla Responds to Consumer Reports

By Daniel Sparks – Updated Apr 10, 2019 at 11:16AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The electric-car maker says it has already addressed most of the Model 3 issues detailed by the product-rating company.

Tesla (TSLA -1.10%) shares fell about 4% Thursday after product-rating company Consumer Reports (CR) said it was pulling its recommendation on the electric-car maker's Model 3 over reliability issues. "Owners report problems with paint, trim, and electronics," CR found in its annual reliability survey.

CR's decision to no longer recommend Model 3 comes as the company is ramping up production of the important vehicle and expanding deliveries to Europe and China. With Model 3 expected to account for about three-fourths of Tesla's vehicle deliveries in 2019, it's easy to see why this news could rattle some investors.

Fortunately, Tesla says it has already addressed most of the issues listed by CR.

A red Tesla Model 3.

Model 3. Image source: Tesla.

Consumer Reports' issues with the Model 3

It's CR's policy to refrain from recommending vehicles that have below-average reliability based on its surveys. The product-rating company's latest annual survey suggested the company's Model 3 does indeed have below-average reliability, prompting the company to pull its recommendation for the vehicle.

The survey surfaced "numerous problems," CR wrote on Thursday. CR's Patrick Olsen explained the issues in the company's news release.

Model 3 owners in our spring survey sample reported some body hardware and in-car electronics problems, such as the screen freezing, which we have seen with other Tesla models. The latest survey data also shows complaints about paint and trim issues. In addition, some members reported that the Model 3's sole display screen acted strangely.

Glass defects were also a problem for some owners, Olsen said.

There was one important area, however, where Tesla continues to perform well when it comes to reliability. Buried in the last paragraph of CR's news release about Tesla's reliability ranking, Olsen wrote, "By contrast, CR members have reported few problems with Tesla's unique electric powertrains, which may be due in part to their relative simplicity when compared with traditional internal-combustion engines."

Tesla's response

The electric-car maker was quick to respond to the Model 3's below-average reliability ranking, pointing out to media that -- just a few weeks ago -- CR ranked the Model 3 as having the highest owner satisfaction of any car. The automaker also pointed to each of its vehicles' safety ratings with the National Highway Traffic Safety Administration (NHTSA); all three of its current models -- the Model S, X, and 3 -- have five-star overall ratings and five stars in every category and subcategory. 

Responding to the specific Model 3 problems detailed by CR, a Tesla spokesperson said: "This new data from Consumer Reports comes from their annual Owner Satisfaction survey, which runs from July through September, so the vast majority of these issues have already been corrected through design and manufacturing improvements, and we are already seeing a significant improvement in our field data."

Model 3 vehicles that were delivered before the end of September were the byproduct of a wild production ramp-up. Tesla went from producing just 28,578 Model 3 units in the quarter ending June 30, 2018 to 53,239 units in the quarter ending Sept. 30, 2018. Since then, production volume of the new vehicle has stabilized at levels slightly above what was seen in the third quarter of 2018. Tesla produced 61,394 Model 3 vehicles in the fourth quarter of last year and it expects production to steadily increase throughout 2019.

Check out the latest Tesla earnings call transcript.

Hopefully, Tesla can double down on quality in 2019 as its Model 3 production levels stabilize at more consistent levels.

Editor's note: An earlier version of this article incorrectly stated Tesla's Q2 Model 3 production total. 

Daniel Sparks owns shares of Tesla. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Tesla, Inc. Stock Quote
Tesla, Inc.
TSLA
$265.25 (-1.10%) $-2.96

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
332%
 
S&P 500 Returns
104%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.