Consumer Reports No Longer Recommends Tesla Model 3, Cites Reliability

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Tesla stock dipped slightly today (down ~2 percent as of this writing) after Consumer Reports declared it would no longer recommend the Model 3 based on customer feedback about reliability of the vehicle.

“When we look at the Model 3 lot of the issues are the electronics,” Jake Fisher, the senior director of automotive testing at Consumer Reports, told CNBC. “There are some issues replacing the (navigation/infotainment) screens, for instance, but we’ve seen other issues in terms of the trim breaking and the glass.”

Fisher noted that CR’s reliability metrics are based on long-term reports from vehicle owners as well as its own evaluations and vehicle crash performance. In this case, the feedback from owners has reflected general concerns about how well the Model 3 was assembled. Fisher also noted that even the test vehicle CR purchased (the company buys all of its cars) had a small stress fracture in one rear window.

When reached for comment, 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.”

CR car brand scores.1550771902256

This is not entirely true. The standard vehicle survey runs through the middle of the year; CR says it sends out its request for information in the spring and the annual report dropped this past October. But in its report today, the company also included additional information:

For the past few years, CR has been going back to car owners who did not answer the initial survey to gather additional information, and to include a greater number of the newest vehicles. These later responses have been incorporated into the ratings found in our annual April autos issue.

With the new data, CR’s sample size of 2018 Model 3s nearly doubled, bringing the total number of Model 3s involved to more than 500. These latest survey responses contained a relatively high number of reliability complaints. (Emphasis Added)

In other words, the vehicles being surveyed in this latest update were not necessarily purchased in the earlier part of 2018. They may have been purchased significantly later in the year. And that changes how we evaluate this information.

The mad scramble to bring Model 3 production up to the must-hit level of 5,000 vehicles per week was an incredible ordeal. Elon Musk’s own bizarre behavior throughout much of 2018 is evidence of this, as were his frank admissions that Tesla was in the middle of “production hell” with the Model 3. Early vehicle teardowns memorably caused one analyst to declare the car on-par with a 1990s Kia. Tesla had to tear up its own plans for a fully automated manufacturing plant in favor of a huge tent in one of its parking lots. It suffered fires and dealt with various other bottlenecks and problems in manufacturing. Throughout this entire process, the drumbeat focus was to boost production and ship more vehicles.

It is exceedingly difficult to simultaneously fix all of the huge problems causing you to miss your production window and to debug every small issue that might be causing some quality control problems after cars have actually shipped. Glass being slightly more prone to stress fracturing is the kind of issue you might not even realize you had in the madcap scramble to kick vehicles out the door.

Bloomberg-Tracker

If you consult the Bloomberg Tracker, the ugliest period of Tesla’s ramp falls squarely into the July-September time frame that the Tesla spokesperson mentioned. The red line shows the end of September. But this second data set was collected after the first collection period ended (presumably in September, since the reliability report came out in late October). Presumably, this means it reflects the reliability issues of a later set of vehicles, including some vehicles that were rolling off the factory after September.

There are too many variables in play to draw conclusions about what Tesla’s defect rate looks like. Clearly, it was the later reports it received that caused CR to withdraw its recommendation, but we don’t know when those vehicles were manufactured or when Tesla introduced specific fixes to the issues they have, assuming it has done so. Since we don’t know how long it typically takes these issues to manifest, there’s no way to know if we’re seeing predictable manufacturing problems related to the company’s effort to ramp production or sustained problems that have persisted through the production ramp and continue to plague the car. This can also happen — CR specifically notes that it continues to not recommend the Model X because the Model X’s falcon-wing doors continue to suffer from a relatively high rate of mechanical problems.

If Model 3 reliability continues to improve as quickly as Tesla implies it has, those results should also be reflected in future surveys as Tesla reduces the vehicle’s price and more customers take possession of their cars. By the time CR does its next update in October, Tesla should be in a stronger position. If it doesn’t, it’ll tell us that these issues have stuck around for longer than they should’ve, notwithstanding the company’s aggressive improvement schedule.

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