Tesla fires back at claims that its cars suffer from major quality issues

A Tesla Model S.Tesla

Reuters reported that Tesla's Model S and Model X vehicles suffer from frequent flaws.
But Tesla has never been outstanding at the nuts-and-bolts aspects of carmaking.
On track to delivery 100,000 vehicles in 2017, Tesla appears to enjoy endless owner patience.

On Wednesday, Reuters reported that more than 90% of new Tesla Model S and Model X vehicles have some sort of problem or flaw that needs to be fixed before the vehicles can leave the factory.

Reuters cited unnamed workers and reviews of unconfirmed "figures from Tesla’s internal tracking system as recently as October." The news agency also reported that "people told Reuters of seeing problems as far back as 2012."

That was the year the Model S sedan went into production as the company's first all-Tesla vehicle (the original Tesla Roadster was built in a chassis supplied by Lotus).

Tesla pushed back against the report.

“Our goal is to produce perfect cars for every customer," a Tesla spokesperson said in a statement emailed to Business Insider. "Therefore, we review every vehicle for even the smallest refinement."

The statement went on to point out that Tesla strives to go over its vehicles with a fine-toothed comb, post-production.

"The number of labor hours needed to complete a vehicle has decreased 33% since early 2016," Tesla said.

"Of the 250,000 Tesla vehicles ever produced, more than half were built in the past 18 months. Whereas before, it took three shifts with considerable overtime to produce our target annual production of 100,000 Model S and X vehicles, now it can be done with only two shifts and minimal overtime."

Tesla says customers are very happy

Shares of CEO Elon Musk's all-electric carmaker were trading down over 3% on Wednesday, to $307. The stock has been sliding at the end of 2017 after a huge run-up to nearly $400 earlier.

So what are we to make of the Reuters report?

Not much, and I say this as someone who has made a hobby of studying nearly every Tesla vehicle I spot in the wild for quality control issues, chiefly large gaps between body panels. For the record, I've tested just about every trim level of every vehicle Tesla makes and for the most part, the quality has been quite good. I'm not sure how the cars would fare over the long haul, but Tesla owners seem to be a very happy bunch.

According to Tesla, the company "has the highest customer satisfaction levels and the highest percentage of customers who say that their next car will be a Tesla in the entire global auto industry.”

It's also worth noting that demand for the Model S and Model X has been solid enough to bring 2017's projected deliveries tally to a record 100,000 vehicles.

Production problems are nothing new

Tesla Factory Tesla's factory.Benjamin Zhang/Business Insider

Quality does matter on luxury vehicles that sell for $100,000 on average. But Tesla has always been iffy on the nuts and bolts of the business. That hasn't changed with the new Model 3, either, as Tesla is struggling to achieve its ambitious production targets with the car, a $35,000 mass-market effort.

People who want to buy a Tesla just don't care. They're invested enough in the brand — its snazziness and excitement, it transformational nature — to overlook stuff that would offend the owner of a used Honda Civic. But that's the crux of the matter: anybody can buy a Civic, but you have to commit to a vision of a gasoline-free future to buy a Tesla, so you're investing in something more than bulletproof build quality.

Tesla has also always had production challenges. The Model S had 'em in the beginning, as did the Model X and the obviously the Model 3 continues this theme.

Tesla disputes quality issues

Tesla does care, however — it knows that the patience of owners can't be taken for granted. The company disputed the 90% figure cited by Reuters, maintaining that vehicles can't leave the factory unless they have no problems whatsoever. So anything that doesn't pass muster is checked out and fixed.

The company also contradicted Reuters' report that flawed vehicles are moved to a separate location for further work.

The Reuters story concerned the Model S and Model X, but as far as the Model 3 problems go, they could be easily solved by Tesla outsourcing some production to an experienced and capable contract manufacturer. But that would undermine the company's narrative of end-to-end control of the vehicle experience. An outside manufacturer also might not want to engage in the extensive examination of vehicles that Tesla says is what leads to smaller issues being caught before a car leaves the factory.

Arguably, the trade-off wouldn't be worth it, although if the Model 3 doesn't hit its mid-2018 targets, Tesla may have to consider this option.

Tesla is trying to get as many electric vehicles on the road as possible, and that master plan could set it up for headaches down the road, as it will likely have to eat the cost of fixing everything that goes wrong with Model 3s once they start rolling in bigger numbers. But it's probably better to have an infinite warranty tacitly in place than to miss a window to put, optimistically, a million EVs on the world's highways by 2020.

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