Tesla shares fall after Consumer Reports says it will no longer recommend Model 3

  • Tesla shares fall nearly 2 percent after a new report, based in part on the reviews of thousands of vehicle owners, raises questions about the reliability of Tesla's Model 3.
  • Consumer Reports says it will no longer recommend the Model 3 due to the reliability issues.
  • A Tesla spokesperson said, "The vast majority of these issues have already been corrected through design and manufacturing improvements."

Tesla shares fell after a new report, based in part on the reviews of thousands of vehicle owners, raises questions about the reliability of the electric car maker's Model 3. Consumer Reports says it will no longer recommend the Model 3 due to the reliability issues.

"When we look at the Model 3 a lot of the issues are the electronics," said Jake Fisher, senior director of automotive testing at Consumer Reports. "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."

Tesla shares were down nearly 2 percent after the report was released Thursday.

Consumer Reports' recommendation of particular models is based on several factors, including the feedback of vehicle owners, crash test performance, and the testing and reviews conducted by the Consumer Reports auto team. While it reached its conclusion after reading reports of Tesla owners complaining about the fit and finish of their vehicles, Fisher points out that the Model 3 owned and tested by Consumer Reports had a rear window with a small stress fracture.

This report confirms the concerns many analysts have raised about the quality of Tesla models slipping as the automaker ramped up production last year. As Tesla CEO Elon Musk pushed his team to meet ambitious Model 3 production targets, he repeatedly said Tesla was in the midst of "production hell."

At one point, Tesla added an additional Model 3 assembly line by erecting a permanent tent outside its assembly plant in Fremont, California. Reports of production issues ranged from robots on the assembly line not working properly to Tesla employees claiming the company was churning out a high volume of flawed parts that led to the automaker needing to rework and repair new models before being shipped to customers.

When asked about Consumer Reports' new opinion of the Model 3, a Tesla spokesperson said,: "We're setting an extremely high bar for Model 3. We have already made significant improvements to correct any issues that Model 3 customers may have experienced that are referenced in this report, and our return policy allows any customer who is unhappy with their car to return it for a full refund."

The spokesperson added, "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."

While many Tesla owners may not be happy about the reliability of their car, Consumer Reports says those owners are generally satisfied with their electric vehicles.

"They like their cars, but they still tell us the truth. They tell us the problems they are having with them," said Fisher.

As a brand, Tesla fell 11 spots to No. 19 out of 33 brands ranked by Consumer Reports. Tesla is tied with Chrysler for having the biggest drop in brand rankings in this year's auto issue.

By comparison, Subaru has soared to the top of the latest car brand rankings. The Japanese brand climbed six places to become No. 1 in the eyes of Consumer Reports, just ahead of Genesis, Porsche, Audi, Mazda and Lexus.

"Subaru does almost everything really well," said Fisher. "They make an enjoyable car to drive and great reliability too."

The lowest-rated auto brand by Consumer Reports is Fiat, right behind Jaguar and Land Rover.

"Fiat brand results continue to be skewed by limited models and sample sizes," a company spokesperson said. "The Fiat 124 Spider was named a back-to-back Consumer Guide Automotive Best Buy for 2017 and 2018 as well as winner of Kelley Blue Book's 2019 5-Year Cost to Own Award."

Correction: As a brand, Tesla fell 11 spots to No. 19 out of 33 brands ranked by Consumer Reports. An earlier version misstated Tesla's ranking.