Tesla runs into new problems

US traffic safety authorities are looking into suspension problems with the Tesla Model S. Customers are also complaining that they have to sign non-disclosure agreements if they want their cars repaired. Some charge that the company is trying to suppress news about safety issues. John Dyer reports from Boston.

Tesla share prices have fallen due to reports of suspension problems with the Model S. (Image credit: Tesla)

Tesla share prices have fallen due to reports of suspension problems with the Model S. (Image credit: Tesla)

Questions about the safety of Tesla’s Model S electric sedan last Thursday overshadowed the company’s unveiling of a new lower priced version of the model.

Tesla priced its new Model S at USD 66,000, almost 10 per cent less than the lowest price of other models. The new car has a battery that limits the sedan’s range to 320 kilometres, around 80 kilometres less than other models.

The new car reflects Tesla’s desire to turn declining sales around of the Model S, which it blamed on technical problems in its factory that caused shipments to stall and supplies to run out.

NHTSA looking into complaints

But on the same day the Silicon Valley company hoped its new car would boost its bottom line, the National Highway Traffic Safety Administration, or NHTSA, issued a statement saying it was examining a suspension problem in the Model S.

NHTSA received 33 complaints from Model S owners about springs, joints and other wheel problems that could to loss of control.

At the same time, NHTSA is also looking at provisions in Tesla contracts with customers that regulators said would suggest the company has sought to suppress news about the suspension malfunctioning. Tesla contracts allegedly require owners to sign nondisclosure agreements if they want to have their cars repaired. But people always have the right to complain to regulators about safety concerns, NHTSA officials said.

“The agency immediately informed Tesla that any language implying that consumers should not contact the agency regarding safety concerns is unacceptable, and NHTSA expects Tesla to eliminate any such language,” said a spokesman for the federal auto safety regulator, Bryan Thomas. “Tesla representatives told NHTSA that it was not their intention to dissuade consumers from contacting the agency.”

Tesla downplays reports

In a blog post entitled “A Grain of Salt,” Tesla downplayed reports of an investigation.

“There is no safety defect with the suspensions in either the Model S,” the blog post said. “Since we own all of our service centrew, we are aware of every incident that happens with our customer cars and we are aware of every part that gets replaced.”

The company also noted that NHTSA has not opened an official investigation into the matter. It also disputed allegations that it would seek to bar car owners from speaking to regulators.

“Tesla has never and would never ask a customer to sign a document to prevent them from talking to NHTSA or any other government agency,” the blog said. “That is preposterous.”

Share prices drop

Still, Morningstar analyst David Whiston said the attention was unwelcome for a relatively new company that is unrolling new products and building a large new facility in Nevada in hopes of ramping up production.

“That could be very damaging,” said Whiston. “Tesla has to be very concerned about their image because they’re a young company and they’re trying to attract people to a new type of vehicle.”

Tesla’s stock before trading opened in New York on Friday was USD 229.36, a decrease of USD 6.16 or 2.6 per cent.

Previous technical problems

This is not the first time Tesla has encountered technical problems with its cars.

Two years ago, the NHTSA raised questions about the shield under the Model S that protects its battery. Tesla reinforced the shield after the company and regulators determined that road debris could hit the batteries and cause fires.

Earlier this year, Tesla recalled its Model X sports utility vehicle due to problems with the rear seats. The NHTSA was not involved in the recall. The company has also reported manufacturing problems with the Model X’s upward-opening, falcon-wing doors.

Some of Tesla’s challenges stem from founder Elon Musk’s insistence to create everything from scratch, said experts. The PayPal co-founder also owns SpaceX, a space exploration company, as well as other ventures that he hopes will produce world-changing products and services in the coming years.

But while starting from scratch could produce innovations, it also means the company is learning how to deal with regulators, marketing challenges and other issues that traditional auto companies know how to handle.

“Everything they do, they try to do differently than the traditional auto company,” said Autotrader analyst Michelle Krebs. “But they all have to deal with the same rules.”

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