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Some early owners of Tesla's Model 3 are reporting quality problems. Do buyers care?

Russ Mitchell, Los Angeles Times on

Published in Automotive News

Munro is no Tesla foe. "I don't want any U.S. companies to fail, especially one that is associated with national pride," he said. Munro runs a manufacturing consulting company, Munro & Associates, outside Detroit. It contracts with manufacturers of cars, airplanes, washing machines and other products in North America, Europe and China.

Auto companies hire Munro to tear down new cars and find manufacturing and design defects. The results are fed back into the production process for improvement or to get a closer look at the competition. Munro's tear-down client is confidential, but he said it's not Tesla. He prefers not to reveal how he got the car.

Before the tear-down began, Munro identified several surface problems with the new Model 3, with a video posted on YouTube.

"The way they did the gaps on this car are like, you can see them from Mars," he says in the video. "This thing is a miserable job."

Tesla found short-cut fixes to problems he said traditional auto manufacturers would never allow.

"They stuck an extra piece of cat's paw in here," he says, pointing out the rubber-like material that seals the glass when the window rolls up to keep out the rain. "You're not supposed to just glue on another piece. Usually you take whatever's wrong and pull it out, put another one in. I never saw that before."

The front doors rattled when closed. There were big gaps between body panels with the trunk lid closed -- not just too wide, but uneven.

"Look over here, I can barely get my fingernail in" on one side of the trunk seam, but "over here I can almost put my thumb in...I can't imagine how they released this. It's just a surprise, a really big surprise for me."

After the video was shot, Munro said, he found other problems, including "wires to nowhere" and rear-door insulation that was installed backward. "I'd never seen that before," he said.

Quality problems, however, don't seem to be souring Model 3 owners and deposit holders on the forums.

Stephen Page, 68, a retiree living in Glendale, drives a Toyota Yaris and can't wait to get his Model 3, no matter what. He camped out in March 2016 for an early spot on the Model 3 waiting list, putting down the requisite $1,000 refundable deposit. He's got a Tesla hat and a Tesla shirt.

"I've been waiting two years," he said. "I'm very anxious to get my car. I'm not rich. The car I'm buying is about $64,000. My wife said it's my birthday and Christmas present for the next 10 years."

Quality problems don't dissuade him, he said. "Because they'll fix it. My friend tells me they're better at fixing things than putting them out."

The last time Tesla reported the number of deposit holders was in July 2017, when it said 455,000 people were signed up. No updates have been offered since.

If the quality problems prove widespread and don't get fixed at the manufacturing sites, that list could start shrinking as potential customers ask for their $1,000 back.

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"You'll get those first customers," said engineer Munro. "These guys are like fanatics. But that's not going to last long. If more and more of these issues keep popping up, you can kiss your market share goodbye."

Some deposit holders are demanding refunds already, less because of quality problems, more because the widely promoted "mass market" affordable $35,000 Model 3 is nowhere in sight.

The company said in a recent shareholder letter that it will focus on higher profit margin vehicles. Although the company still advertises the $35,000 price on its website, a Model 3 can't be had for less than $49,000 and, with the Autopilot self-drive system and other options, can easily exceed $60,000. After its earnings announcement and analyst conference call on Feb. 7, Tesla adjusted its delivery timeline for the $35,000 model, pushing it to late 2018 or early 2019.

David Melgar, a software programmer in Raleigh, N.C., is a big fan of Tesla and Musk's vision of a sustainable energy future. He even bought stock in Tesla, at $30 a share. It closed Friday at $335.49 on the Nasdaq stock exchange, rebounding like the rest of the markets from a dip down to $310.42 on Feb. 9. But he said he feels duped by hype about a mass-market car.

"If they had taken deposits and said it's for a $49,000 car, that's totally honest, that's not disingenuous," he said. "I hope Elon will think twice about pissing off his customer base by treating them with disdain and making it all about the money."

A Seattle man who goes by the screen name "206er" said he asked for a refund last week after his place in line got bumped from early 2018 to early 2019. With a wife, one child, and another on the way, he said, he can't afford much more than the $35,000 base price that was advertised.

"I really wanted this car to work out for our family," he said in an email to The Times. "But the delays mean that we won't be able to join the Tesla family anytime soon." He declined to reveal his name.

Tesla and Musk, of course, would like to satisfy market demand as soon as possible. In the recent conference call with analysts, Musk forecast an annual run rate of 260,000 Model 3s by the end of July.

He's sticking by his forecast of a million cars a year by the end of 2020, at which point Musk said traditional automobile manufactures should take notice.

"Actually they are quite good at manufacturing, but they just don't realize just how much potential there is for improvement," he said. "It's way more than they think."

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