Yahoo Finance US regulators demand Tesla hand over information amid investigation into production forecasts
US regulators have demanded Tesla hand over information as part of a criminal investigation into whether Elon Musk’s electric car maker misled investors over its production figures.
The company has disclosed that it had received a subpoena from the Securities and Exchange Commission, and an informal request for information from the Department of Justice.
The two regulators are investigating whether Mr Musk and the company over-promised about how many of its new Model 3 car it could make.
The investigation threatens to drag Tesla back into trouble even as it appears to emerge from a year of turmoil. It recently settled a separate SEC probe over Mr Musk’s aborted plan to take the company private, and last week soothed investors’ fears over its financial state by reporting its first profit in two years.
“The SEC has issued subpoenas to Tesla in connection with… certain projections that we made for Model 3 production rates during 2017 and other public statements relating to Model 3 production. The DOJ has also asked us to voluntarily provide it with information about each of these matters and is investigating,” the California-based company said in a filing.
Tesla has often struggled to hit its chief executive’s ambitious production forecasts. When it first began manufacturing the Model 3 in the summer of 2017, Mr Musk tweeted that it could be making 20,000 cars a month in December. The company ultimately made only just 2,425 in the entire fourth quarter.
Missing production forecasts is not uncommon but the regulators are investigating whether Tesla’s were deliberately misleading.
“To our knowledge no government agency in any ongoing investigation has concluded that any wrongdoing occurred,” Tesla said. “As is our normal practice, we have been cooperating and will continue to cooperate with government authorities. Should the government decide to pursue an enforcement action, there exists the possibility of a material adverse impact.”
The Model 3 saloon, a more affordable car than Tesla’s previous models, is seen as crucial to the company’s future and Mr Musk has described Tesla’s push to make enough vehicles as “production hell”.
A growing number of photos - including aerial shots - have been posted on Twitter showing cars with mis-matching or missing panels parked around its factory in Fremont. They show what the posters claim are piles of scrapped parts such as sub-frames and plastic panels, built in a rush to hit quarterly production targets.
This garbage yard is in the southeast corner of the property. Piles of scrapped frames and fully assembled vehicles to the right and scrap plastics to the left. I've included detail shots of the vehicle piles I've posted separately, because WTF? $TSLAQ#fremontfolliespic.twitter.com/BxaSkPj3Xu
— Machine Planet (@Paul91701736) November 1, 2018
Professor David Bailey, an automotive industry expert at Aston University, said: “The pictures suggest big rework and rectification issues with vehicles coming off the production line. Quality has historically been an issue for Tesla but early buyers were willing to accept that because they bought into image - the mass market will not be so forgiving.”
He added: “It could have been that they were so keen to rush cars off the production line that that they pulled out all the stops to hit their targets to keep investors happy and make a profit and this is the consequence.”
This week, Mr Musk called reports that the criminal investigation was deepening and that the FBI was closing in “absurd” and “utterly false”.
In an interview with the tech news website Recode, he added that he “probably would not” take money from Saudi Arabia after the alleged murder of the journalist Jamal Khashoggi last month.
Tesla has a $2bn (£1.5bn) investment from the Saudis, and was linked to a further injection of cash from the regime after Mr Musk tweeted in August that he had secured funding to take Tesla private.
