Tesla Shares Fall 10% After Consumer Reports Drops Recommendation

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Originally published on RenewEconomy.
By Sophie Vorrath

Shares in prestige electric vehicle maker Tesla fell 10 per cent on Tuesday after consumer group Consumer Reports dropped its recommendation of the Model S car on the basis of a series of customer complaints.

rsz_elon_musk_tesla_factory_fremont_ca_usa_8765031426-300x249Consumer Reports – which has reviewed the Model S three times now, mostly glowingly – dropped its recommendation of the luxury sedan after a growing number of owners of the EV (14,000 of them, to be precise)  reported a range of problems.

The problems included squeaking noises, motors that needed to be changed before end of warranty, and issues with the car’s automatic door handles failing to present themselves when drivers approached, leaving them locked out of their own cars.

There were also reports of sunroof leaks, problems with the car’s drivetrain, power and charging equipment, and issues with the dashboard screen.

“On our test track, the car is second to none,” said Jake Fisher, Consumer Reports’ director of automotive testing.

“But when we talk about reliability, we are talking about things that break. This is a new vehicle, with a new platform, and they are experiencing growing pains. Hopefully, they will learn from them.”

The change in rating – from “average” to “worse than average” – sent Tesla shares down as much as 10 per cent in midday trading, and the stock closed down $15.07, or 6.6 per cent, at $213.03 a share.

Tesla, which is big on social media, still has nothing but Model S testimonials on its Twitter feed. The California-based company did, however, respond in the traditional manner to the Consumer Reports’ downgrade.

“Close communication with our customers enables Tesla to receive input, proactively address issues and quickly fix problems,” the company said in a statement.

“Over-the-air software updates allow Tesla to diagnose and fix most bugs without the need to come in for service. In instances when hardware needs to be fixed, we strive to make it painless.”

On this point, Consumer Reports concedes that most surveyed Tesla Model S owners – 97 per cent – were happy enough with the product that they would buy their car again.

“It appears that Tesla has been responsive to replacing faulty motors, differentials, brakes and infotainment systems, all with a minimum of fuss to owners,” the report said.

But it also notes that Tesla’s real problem could be down the road a bit, when warranties expire or when the company begins mass-producing its mid-price range EV, Consumer Reports said.

“It’s one thing to have a quirky, problematic car that sells 20,000 units per year to wealthy people who probably own at least one backup vehicle,” the report concluded. “It’s quite another when Tesla scales up to its 2020 projection of 200,000 US Model 3 buyers, who may not have the luxury of being so forgiving.”

Or, as this Bloomberg View columnist put it: “Tesla, for all its achievements to date, is still aiming to expand by orders of magnitude in a matter of five years and will inevitably face the occasional setbacks and competitive pressures that bedevil any car company. Dreams can withstand a lot, but not the mundanities of the real world.”

Reprinted with permission.

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