Tesla has confirmed that it provided documents to the Department of Justice amid reports that the FBI is probing whether the automaker misled investors by stating and then repeatedly missing its weekly production goals.
Less than a month after Elon Musk agreed to step down as Tesla chairman and pay a hefty $20 million to the US Securities Commission for a couple of misleading tweets about taking the company private, new legal troubles could now be looming for the embattled entrepreneur.
The Wall Street Journal reported on Friday that the FBI has intensified its previously unreported investigation into Tesla's production statement. The agents allegedly believe that Tesla might have deliberately set unrealistic production goals to fire up investors.
Tesla reached its 5,000-per-week goal for the Model 3 sedan, its most affordable "mass-market" car, in summer, producing 5,031 units in the last week of June. The company descended into a "production hell" to hit the milestone, as staff scrambled to churn out more cars to meet the deadline after repeatedly missing production targets in the past. Musk, who hailed the achievement, oversaw the process sleeping rough for five days on the factory floor. Many wondered whether a production rate achieved by such strenuous effort was sustainable.
Back when first Model 3s rolled off the production line in July 2017, however, Musk was talking big goals – and it's those stated targets that are now getting the Feds' attention. According to the WSJ, several former Tesla employees have already been issued with subpoenas and requests to testify.
Musk initially tweeted that he expected Tesla to reach a 5,000-per-week production rate by December 2017, and 10,000-per-week by the end of 2018.
In reality though, Tesla managed only a humble 2,425 Model 3s during the last quarter of 2017.
After bungling its first production targets, Tesla lowered the expectations, but not enough to actually be able to meet them. In November 2017, Musk said that he expected to produce 5,000 models per week "probably sometime in March," and was ultimately three months late anyway.
Responding to the WSJ report, Tesla said that it was unaware of any formal investigation going on, but admitted that it provided documents on its "public guidance for the Model 3 ramp" to the Department of Justice earlier this year. According to the company, the request was voluntary and the automaker cooperated with the investigators. It has dismissed the allegations that it had tried to dupe investors with overinflated production targets.
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.
The company blames grossly missing production goals on "difficulties that we did not foresee."
Musk, whose Twitter use is now overseen by investors, appeared to support the idea that it was the WSJ that manipulated stocks with its reporting.
"Good question," Musk tweeted, responding to a comment by another user, who wrote: "Where is the SEC when the WSJ publishes old information purely meant to distort the stock and harm investors?"
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