Consumer Reports has withdrawn its recommendation for the Tesla Model S citing poor reliability for the sedan. The car has been given a “worse-than-average” rating in the CR annual report on new vehicle predicted reliability.
Stock for Tesla dove more than ten percent and then rose slightly to recover at a 7 percent loss. Investors, who’ve already become a bit skittish over the automaker’s stocks due to over-valuation concerns and anticipated problems with the company’s new model rollouts. Delays have been a constant with Tesla’s new vehicle introductions and much of the expected future valuation of the company hinges on the Model 3, slated to be unveiled next year for a 2017 model year target. Yet delays with the Model X, now entering production, and concerns over product reliability are beginning to weigh heavily.
Tesla’s reputation among consumers has been one of high marks thanks to their small size and low sales volume allowing them to proactively take repairs to the customer. This is a big change from the traditional model, following the model used by many ultra-luxury makes. The concern investors and others in the industry have is that with a volume model, as the Model 3 is planned to be, this may not be tenable.
Jake Fisher, director of automotive testing at Consumer Reports, said that problems in newer vehicles seem to be consistent in their appearance and now that older vehicles are getting past traditional warranty periods (average vehicle warranties are 3 years), serious problems such as propulsion motor and charging system failures are entering the picture. One of the more common concerns with all Model S vehicles, for example, are the retreating door handles, which often fail. Fisher points out that this could mean quality control issues and wonders what that would mean for the “falcon wing” doors on the new Model X.
The industry is watching now as Tesla works to double production for 2016. If quality control issues are not addressed and potential design flaws are not remedied beforehand, this could spell serious long-term problems for the company and its reputation.