Tesla (TSLA 4.58%) and Consumer Reports are friends again. The love-hate relationship took a turn for the better after two of Tesla's electric vehicles landed on the group's recommendation list.
It marks an about-face for the consumer watchdog group, which has snubbed Tesla in the past, much to the disdain of CEO Elon Musk, who has used his Twitter feed to slam the group. Consumer Reports lost faith in the Model 3 in February due to what it said was too many reliability issues to ignore.
In its most recent annual survey, Consumer Reports said it is now recommending the Model 3 and Model S sedans because of improving reliability. "The Tesla Model 3 struggled last year as the company made frequent design changes and ramped up production to meet demand," Jake Fisher, senior director of auto testing at CR, said in a press release announcing the results of its annual survey. "But as the production stabilized, we have seen improvements to the reliability."
Tesla manufacturing finally humming along
Those comments are music to Tesla's ears. After months of manufacturing missteps and snafus with the Model 3, Tesla's production appears to be humming along here and overseas. That may bode well for the stock if an endorsement from Consumer Reports lifts sales of its vehicles. Safety and reliability are big selling points for consumers, particularly for ones behind the wheel of an all-electric vehicle.
It completed its Shanghai Giga Factory ahead of schedule and just announced the first vehicles for the Chinese market have rolled off the production line. It also revealed Berlin will be the location of its European manufacturing plant and said the Model Y is ahead of schedule. It was also able to post third-quarter gross margins that were up despite a decline in average selling prices. Gross margins came in at 22.8%, up from 18.9% in the second quarter.
In order for Tesla to continue to thrive, its manufacturing and production needs to be predictable. It also needs the faith of consumers that its vehicles are safe as well as efficient. The support of Consumer Reports can go a long way here.
In announcing its annual list, Consumer Reports said customers reported fewer problems than in past years with the body of the Model 3 and Model S. Some of the issues that got it in trouble with Consumer Reports include trunks that don't close properly and latches that get stuck with the older models. There were also fewer reports about paint and trim quality issues than in the past. Cruise control, cameras and other power equipment also received fewer complaints.
Consumer Reports won't recommend the Model X
Consumer Reports said it's still not recommending Tesla's Model X SUV and said the in-car electronics "[continue] to be a weakness" with reports of problems with the displays. Consumer Reports' Fisher attributed the reliability issues to Tesla's manufacturing approach. It makes changes to its vehicles throughout the year as they are being manufactured, which creates instability. Tesla's vehicles do consistently well at on-road tests, but the annual surveys have shown inconsistent reliability from one year to the next, Consumer Reports said.
Consumer Reports may be a fan of the Model 3 and Model S, but it's not showing love to Tesla's Smart Summon feature, which lets car owners summon their vehicles from a parking spot or driveway without a driver behind the wheel. Consumer Reports called the automation "glitchy" and said there weren't many "obvious benefits" for consumers. "What consumers are really getting is the chance to participate in a kind of science experiment," Fisher said in October. "This is a work in progress."
Despite the love-hate relationship between the two entities, investors welcomed the news, sending the stock up slightly the day it was announced. Shares of Tesla have been on an upswing since the company reported a surprise profit in its third quarter. With an upbeat outlook, production humming along and Consumer Reports in its pocket, Tesla is riding high, at least for now.