Poor reliability contributed to Consumer Reports’ decision to withdraw its recommendation, although it noted that 97 percent of Tesla owners surveyed said they would buy a car from the company again despite the problems they had with their cars.
Tesla began trading Tuesday at $227.72 but fell to as low as $202 per share during the course of the day. In early trading Wednesday, the stock was hovering around $212 a share.
Consumer Reports withdrew its recommendation for the Model S after publishing a glowing review of the car in August.
“The all-wheel-drive Tesla Model S P85D sedan performed better in our tests than any other car ever has, breaking the Consumer Reports Ratings system,” Auto Editor Mark Rechtin reported.
Surveys Undo Rave Review
Consumer Reports’ auto performance ratings are based on more than 50 hands-on vehicle tests. Reliability ratings are based on user surveys. The initial recommendation was based on performance tests and a previous year’s reliability survey.
“Last year, Tesla came in at average reliability. This year, the number of problems was a lot higher, and they were a lot more serious. That resulted in it coming in at below average,” Rechtin told the E-Commerce Times.
“At the time we did the road test, because we didn’t have the latest survey completed, [the Model S] was considered something we could recommend. As things evolved and we got our data for this year’s survey, we saw that it was below average, and we had to withdraw our recommended rating,” he explained.
“The timing wasn’t great, but that’s the way things happen in the news business,” Rechtin said.
This isn’t the first time a high-performance car lost its reliability status, he added. Both the Chevrolet Corvette and BMW M5 also lost their recommended status this year.
Trust in Tesla
It’s not unusual for a new automaker to have initial reliability problems.
“An automobile is such a complex vehicle that for a new car company to not finish at the bottom of the reliability ratings is pretty amazing to me,” said Mark Duvall, director of the energy utilization group at theElectric Power Research Institute.
“It’s a matter of expectations,” he told the E-Commerce Times. “You’d expect a company like Tesla — a brand-new startup with highly innovative cutting-edge technology — to have some growing pains around reliability.”
Electric cars have proven to be more reliable than internal combustion vehicles because electric cars have fewer moving parts, Duvall said.
“There’s nothing inherently unreliable with electric cars, but with Tesla, it’s not enough to have door handles. They have to have doors that open as you approach the vehicle,” he said.
“Luxury automobiles, on average, tend to have lower reliability than traditional passenger cars,” Duvall added. “Primarily that’s because they have a lot of extra features on them. They have a lot more moving parts.”
Although Consumer Reports’ action appears to have influenced investors’ attitudes toward Tesla, it’s unlikely to have a far-reaching impact on the company.
“Tesla is in that rarified Apple kind of space where they can almost do no wrong,” said Roger C. Lanctot, associate director for the global automotive practice atStrategy Analytics.
“Tesla is coated in reputational Teflon,” he told the E-Commerce Times. “People just look the other way. If it were General Motors having the smallest of problems with their first electric vehicle, people would just pounce on them.”
“I don’t think in the long run [Consumer Reports’ decision] will have a great deal of impact on Tesla,” said Sam Abuelsamid, a senior research analyst withNavigant Research.
“The customers in the price segment where they’re selling that car are more forgiving of these types of problems,” he told the E-Commerce Times.
Tesla has a big advantage compared to other companies, maintained Thilo Koslowski, vice president and automotive practice leader atGartner.
“Its buyers appreciate the product enough that they’re willing to forgive them for these teething problems,” he told the E-Commerce Times. “That’s a huge asset that Tesla has that I don’t think other brands have.”
One such customer is Adam Schmidt, a Seattle venture capitalist.
“I still view the car as a version 1.0 of a new technology, so it’s not too upsetting to have a few small problems,” he told the E-Commerce Times.
Luxury car problems are not uncommon, Schmidt said.
“When I’ve gotten my Volvos and BMWs from the factory, they’ve had similar problems,” he said.
“Tesla has been absolutely flawless with all the repairs that I’ve had,” Schmidt added, “and have gone well above and beyond what they needed to do get them sorted out.”