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Tesla Reportedly Facing FBI Probe Over Whether It Misstated Model 3 Production Figures

Tesla this week reported a profit for Q3 of 2018.
Tesla this week reported a profit for Q3 of 2018.
Photo: Christophe Ena (AP)

A small group of Tesla shareholders in late September accused the automaker of deceiving them about the progress of the Model 3 sedan production, claiming the company and CEO Elon Musk knew its timeline was impossible to attain. Now, the automaker is facing a federal investigation over that very issue, according to the Wall Street Journal.


The disclosure Friday of an investigation helmed by the Federal Bureau of Investigation, which reportedly is focused on whether Tesla misstated information about production of the Model 3 sedan, could add fuel to allegations laid out in a Sept. 29 lawsuit filed in U.S. District Court in San Francisco.


The 82-page complaint cites anonymous quotes from a dozen former Tesla workers, including the automaker’s ex-director of manufacturing, who allegedly told Musk “directly that there was zero chance that the plant would be able to produce 5,000 Model 3s per week by the end of 2017.”

“[The former exec’s] told Musk directly at the meeting that the start of manufacturing would be at least 6 months later than July 2017, i.e., in 2018,” the complaint said. Following the meeting, Musk allegedly told the exec to “find new employment,” according to the suit.

A federal judge dismissed an earlier version of the complaint, saying “federal securities laws do not punish companies for failing to achieve their targets,” but he gave plaintiffs until the end of September to refile their suit.

In a statement to Jalopnik, a Tesla spokesperson echoed points made by the company’s attorneys in the shareholder’s dispute and said it has been “transparent about how difficult” the Model 3 production ramp would be from the moment it began.


“Ultimately, given difficulties that we did not foresee in this first-of-its-kind production ramp, it took us six months longer than we expected to meet our 5,000 unit per week guidance,” the statement said.

“Tesla’s philosophy has always been to set truthful targets—not sandbagged targets that we would definitely exceed and not unrealistic targets that we could never meet. While Tesla gets criticized when it is delayed in reaching a goal, it should not be forgotten that Tesla has achieved many goals that were doubted by most. We are enormously proud of the efforts of the whole company in making it through this difficult ramp and getting us to volume production.”


The securities lawsuit includes several quotes from eyewitnesses, who, according to the suit, “confirm what was obvious to the naked eye.” Despite telling the public it would make 5,000 Model 3s per week by the end of 2017, the suit says, internal employees knew it was an impossible task.


“By 2017, just before and during the Class Period, the detailed warnings from [the first and second employees], some spoken directly to Musk himself, were proving to be true,” the complaint said. “Even as Defendants bragged, during the Class Period, about progress that had already been achieved on Tesla’s most important project, the reality in Fremont and at the Gigafactory was far more grim, and visible to anybody visiting the facilities.”

Former employees said as much to Jalopnik in a November 2017 story on Model 3 production issues. Jalopnik reported that the production line was still under construction at the time, and at least one supplier still had yet to receive production approval for their tooling, a necessary step to hit production targets staked out by Musk.


“The line is there… but as far as being able to push a car through there, automated, hell no,” one ex-employee, who left the company in the weeks before our story ran, told us.

The Wall Street Journal reported Friday that FBI agents have contacted former Tesla employees for testimony in the ongoing criminal case. The bureau is “comparing the company’s statements with its production capability during 2017,” the newspaper reported.


“Authorities are homing in on whether the company made projections about its Model 3 production knowing it would be impossible to meet the goals,” the Journal said, citing unnamed “people close to the situation.”

Tesla’s spokesperson told Jalopnik that it’d received a voluntary request for documents from the U.S. Department of Justice about its public guidance for the Model 3 ramp, “and we were cooperative in responding to it.


“We have not received a subpoena, a request for testimony, or any other formal process, and there have been no additional document requests about this from the Department of Justice for months,” the spokesperson said.

News of the probe comes a day after Tesla reported a $312 million profit in the third quarter of 2018, after managing to boost Model 3 production in recent months.


That followed an earlier $40 million settlement with the Securities and Exchange Commission for Musk’s bungled effort to take the automaker private. The Journal reported that the SEC isn’t involved in the investigation over Model 3 production issues.

Senior Reporter, Jalopnik/Special Projects Desk

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Really? got to keep tabs on cars but when it comes to a lifetime appointment on the supreme court for an accused rapist we can just slough that one off. Sheeeeeeeeit.