Tesla

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Tesla’s week gets worse: Fines, safety investigation, and massive recall

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toxic waste, seriously? —

There have been 2,388 complaints about steering failure in the Model 3 and Model Y.

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A Tesla Model Y steering wheel and dashboard

Enlarge / More than 2,000 Tesla model-year 2023 Model Y and Model 3s have suffered steering failure, according to a new NHTSA safety defect investigation.

Sjoerd van der Wal/Getty Images

It’s been a rough week for Tesla. On Tuesday, a court in Delaware voided a massive $55.8 billion pay package for CEO Elon Musk. Then, news emerged that Tesla was being sued by 25 different counties in California for years of dumping toxic waste. That was followed by a recall affecting 2.2 million Teslas. Now, Ars has learned that the National Highway Traffic Safety Administration’s Office of Defects Investigation is investigating the company after 2,388 complaints of steering failure affecting the model-year 2023 Model 3 sedan and Model Y crossover.

Paint, brake fluid, used batteries, antifreeze, diesel

Tesla has repeatedly run afoul of laws designed to protect the environment from industrial waste. In 2019, author Edward Niedermeyer cataloged the troubles the company ran into with air pollution from its paint shop in Fremont, California, some of which occurred when the automaker took to painting its cars in a temporary tent-like marquee.

In 2022, the US Environmental Protection Agency fined Tesla $275,000 for violating the Clean Air Act, which followed a $31,000 penalty Tesla paid to the EPA in 2019. But EPA data shows that Tesla continued to violate the Clean Air Act in 2023.

And on Wednesday, Reuters reported that 25 Californian counties sued Tesla for violating the state’s hazardous waste laws and unfair business laws by improperly labeling hazardous waste before sending it to landfills that were not able to deal with the material.

The suit alleged that violations occurred at more than 100 facilities, including the factory in Fremont, and that Tesla disposed of hazardous materials including “but not limited to: lubricating oils, brake fluids, lead acid batteries, aerosols, antifreeze, cleaning fluids, propane, paint, acetone, liquified petroleum gas, adhesives and diesel fuel.”

Despite potentially large penalties for these industrial waste violations, which could have resulted in tens of thousands of dollars of fines for each day the automaker was not compliant, the counties and Tesla swiftly settled the suit on Thursday. Tesla, which had annual revenues of $96.8 billion in 2023, will pay just $1.3 million in civil penalties and an additional $200,000 in costs. The company is supposed to properly train its employees and hire a third party to conduct annual waste audits at 10 percent of its facilities, according to the Office of the District Attorney in San Francisco.

“While electric vehicles may benefit the environment, the manufacturing and servicing of these vehicles still generates many harmful waste streams,” said District Attorney Brooke Jenkins. “Today’s settlement against Tesla, Inc. serves to provide a cleaner environment for citizens throughout the state by preventing the contamination of our precious natural resources when hazardous waste is mismanaged and unlawfully disposed. We are proud to work with our district attorney partners to enforce California’s environmental laws to ensure these hazardous wastes are handled properly.”

An easy recall, a not-so-easy defect investigation

Tesla’s latest recall is a big one, affecting 2,193,869 vehicles—nearly every Tesla sold in the US, including the Model S (model years 2012–2023), the Model X (model years 2016–2024), the Model 3 (model years 2014–2023), the Model Y (model years 2019–2024) and the Cybertruck.

According to the official Part 573 Safety Notice, the issue is due to the cars’ displays, which use a font for the brake, park, and antilock brake warning indicators that is smaller than is legally required under the federal motor vehicle safety standards. NHTSA says it noticed the problem as part of a routine compliance audit on a Model Y in early January. After the agency informed the automaker, Tesla looked into the issue itself, and on January 24, it decided to issue a safety recall. Fortunately for the automaker, it can fix this problem with a software update.

A software patch is unlikely to help its other safety defect problem, however. Yesterday, NHTSA’s ODI upgraded a preliminary evaluation (begun in July 2023) to a full investigation of the steering components fitted to model-year 2023 Models 3 and Y.

NHTSA’s ODI says the problem affects up to 334,569 vehicles, which could suffer a loss of steering control. There have been 124 complaints of steering failure to NHTSA, and the agency says Tesla identified a further 2,264 customer complaints related to the problem. So far, at least one Tesla has crashed as a result of being unable to complete a right turn in an intersection.

A third of the complaints were reported to have happened at speeds below 5 mph, with the majority occurring between 5 and 35 mph and about 10 percent occurring above 35 mph (at least one complaint alleges the problem occurred at 75 mph). “A majority of allegations reported seeing a warning message, ‘Steering assist reduced,’ either before, during, or after the loss of steering control. A portion of drivers described their steering begin to feel ‘notchy’ or ‘clicky’ either prior to or just after the incident,” NHTSA’s investigation said.

NHTSA says there have been “multiple allegations of drivers blocking intersections and/or roadways,” and that more than 50 Teslas had to be towed as a result of the problem. The problem appears to be related to two of the four steering rack part numbers that Tesla used for these model-year 2023 EVs. They were installed in 2,187 of the vehicles, according to the complaints.

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Tesla posts underwhelming financial results for Q4 2023

Cars, Tesla, Tesla earnings / /

looks more like a normal carmaker now —

Revenues only grew by 3 percent year over year, disappointing the market.

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New Tesla electric vehicles fill the car lot at the Tesla retail location on Route 347 in Smithtown, New York on July 5, 2023.

Enlarge / Tesla sold 1.2 million Model Y crossovers last year.

John Paraskevas/Newsday RM via Getty Images

Tesla published its financial results for the last three months of 2023 this afternoon. The good news for the company is that it met its goal of delivering 1.8 million electric vehicles to customers, as Ars reported earlier this month when the automaker published that data. But a look at the company’s full financial results for Q4 are not as encouraging, and Tesla shares have fallen steeply in post-market trading.

Tesla brought in $25.2 billion in total revenue for Q4 2023, a year-over-year increase of 3 percent. Gross profits were down 23 percent for the quarter year over year, although net income (as determined by generally agreed accounting principles) increased 115 percent year over year. In large part, this was due to Tesla recording a “one-time non-cash tax benefit of $5.9 [billion] in Q4 for the release of valuation allowance on certain deferred tax assets”; non-GAAP income dropped 39 percent.

Free cash flow increased by 33 percent for the quarter, but its operating margin is almost half that of Q4 2022 at 8.2 percent.

For the entirety of 2023, total revenues stood at $96.8 billion, of which $82.4 billion came from automotive revenues, a 15 percent increase compared to 2022. Net profits for the year were 19 percent higher than 2022, but its margin for the year fell from 16.8 percent in 2022 to 9.2 percent in 2023, and for the year, free cash flow dropped by 42 percent.

The Model Y crossover is responsible for much of the company’s success in 2023—Tesla normally does not break out sales or deliveries between the Models 3 and Y, but revealed in its results slideshow that it delivered 1.2 million Model Ys last year, meaning that it also delivered about 500,000 Model 3 sedans. Plenty of price cuts helped make that happen in the US, Europe and China, where it is increasingly under pressure from the Chinese automaker BYD.

The company expanded its supercharger network last year by 27 percent, up to 5,952 stations with 54,892 ports. But not all of these are in North America—the US Department of Energy’s Alternative Fuels Data Center currently lists 2,339 Tesla Supercharger stations in the US and Canada, with 25,893 ports in total.

Tesla’s energy storage business continues to grow, deploying 14.7 GWh of battery storage, an increase of 125 percent year over year. But its solar activities continue to shrink, decreasing 36 percent year over year.

Unlike last year, or even last quarter, Tesla declined to issue specific guidance for the coming year other than saying it continues to work on its next-generation vehicle platform. In fact, the automaker warned that its vehicle growth rate may be “notably lower” in 2024. Earlier on Wednesday, unnamed sources told Automotive News that a compact crossover Tesla could appear in 2025.

Tesla’s stratospheric valuation—which remains far higher than any other automaker—has been built on promises of massive growth and tech-sector profit margins. With these results looking much more ordinary, analysts are starting to cool.

“Tesla delivered another underwhelming quarter, with a notable miss on automotive gross margins standing out the most. Tesla’s worrying China sales figures indicate demand for its vehicles is slowing more than expected in the face of rising competition from local EV companies, including BYD, Nio, and XPeng,” said Jesse Cohen, senior analyst at Investing.com. “I don’t think the price cuts are over, mainly for the reason that demand for its electric vehicles is still weak. The big question is if this is just a blip, or signs of a bigger shift among consumers as higher interest rates and a weaker economic backdrop discourage consumers from making big-ticket purchases.”

“After years of capacity-constrained volume and revenue growth, it seems Tesla is facing its first demand issues. The automaker has been cutting prices over the past year even as sales plateau—and the future doesn’t look bright,” said Karl Brauer, executive analyst at iSeeCars. “Updates to the Model 3 and the ramp up of Cybertruck production are positive news for 2024. But it’s hard to imagine those factors overcoming the increasingly competitive EV market, lower prices, softening sales, and compressed profit margin Tesla is facing over the next 12 months.”

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Tesla’s revamped Model 3 sedan has now gone on sale in the US

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rear lights look better, finally —

The midlife upgrade was available in China and Europe last year.

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A grey Tesla model 3 rendered driving through the mountains

Enlarge / Look closely and you’ll spot the changes to the 2024 Tesla Model 3.

Tesla

Tesla might not have the most expansive range among automakers—the vast majority of its sales come from just two models. But it’s hard to deny that the company has sold a lot of those EVs; in some areas, the only car you might see more than the Model 3 would be the similar-looking Model Y crossover. But now, the eagle-eyed among you may spot some subtle differences on new Tesla Model 3s as the company finally starts selling the restyled version here in North America.

Tesla CEO Elon Musk unveiled the Model 3 in 2016, with customer deliveries starting the following year. Were Tesla any other automaker, a replacement model would almost certainly be in the works for 2025. But Tesla rarely uses the same playbook as its rivals, and it only gave the electric sedan a styling refresh after six years on sale rather than the more-usual four.

The restyled 3, codenamed Highland, went on sale in China in September 2023, and European customers have been able to buy one since last October. But changes to the federal tax credit for clean vehicles may have delayed the introduction of the revised Model 3 here in the US—for 2024, the car is no longer eligible for the credit.

  • The new headlight cluster takes up much less real estate.

    Tesla

  • Opinions are subjective, but I’ve always felt like Tesla designed 90 percent of its cars, then phoned in the rear lights. Finally, that is no longer the case.

    Tesla

  • The upgraded interior can have colored mood lightning now, a feature that’s common on many other EVs.

    Tesla

  • The rear screen is for controlling the climate but also the infotainment, Tesla says.

    Tesla

  • I get a very strong Polestar vibe from the way the top and bottom elements of the lights extend toward each other.

    Tesla

That was then, and now the updated-looking EV is on sale here. The most obvious changes are to the lights. The headlight clusters are smaller than before, with more stylized daylight running lights in a similar vein to the Models S and X. At the rear, it seems someone in the studio has finally worked out how to draw a rear light cluster that looks finished—something that until now let down what has otherwise been a rather handsome car (although I do note a certain resemblance to Polestar’s rear lights in some of the images Tesla has provided).

Tesla says it has two new colors for the Model 3: ultra red and stealth grey. There are new wheel designs that it says are lower drag, which helps the range and wind noise. There’s also an updated interior with user-configurable LED lighting, a better sound system, and now an 8-inch touchscreen for the rear-seat passengers to interact with.

But the range has been simplified. The $50,990 Model 3 Performance (that we tested in 2019) is gone, and there are now just two versions on offer. The rear-wheel-drive Model 3 starts at $38,990 and has an EPA range estimate of 272 miles (438 km). The all-wheel-drive Model 3 Long Range, meanwhile, starts at $45,990 and has a range of 341 miles (549 km).

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Tesla sold 1.8 million electric vehicles in 2023

BYD, Cars, Tesla, Tesla earnings / /

38 < 50 —

It met its sales goal, but growth is well below CEO Elon Musk’s stated target.

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Workers walk past a large Tesla logo.

Getty Images | San Francisco Chronicle/Hearst Newspapers

Tesla found new homes for 1.8 million electric vehicles last year, it revealed on Tuesday afternoon. That will no doubt please CEO Elon Musk—it means the company has met its sales volume goal given to investors when it released its 2022 financial results at the end of last January.

Tesla built 494,989 vehicles in the last quarter of 2023, of which 18,212 were the more expensive but aging Models S and X. More importantly to the bottom line, Tesla built 476,777 Models 3 and Y. For the same three months, it delivered 484,507 EVs, of which 461,538 were the popular Models 3 and Y.

Cumulatively, Tesla built 1,845,985 EVs—1,775,159 Models 3 and Y and 70,826 Models S and X. And it delivered 1,808,581 EVs (1,739,707 Models 3 and Y; 68,874 Models S and X)—meeting the 2023 sales goal of 1.8 million cars sold.

That’s another record year for Tesla, but it’s also another year where the company has fallen far short of its targeted cumulative annual growth rate of 50 percent. Last year, it grew by 40 percent; this year, it grew by just 38 percent.

For that 50 percent CAGR to become a reality, 2024 will need to be a much stronger year than Tesla has had in the past. But that might prove easier said than done. BYD, a Chinese automaker, eclipsed Tesla in EV sales for the first time in Q4 2023, and Tesla’s market share is declining—albeit slowly—in the US as dozens of new EVs have gone on sale of late.

China and the US are Tesla’s two most important markets, and it seems investors have taken notice—Tesla’s share price has fallen almost five percent since the start of trading this morning.

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Tesla Model 3 may lose $7,500 tax credit in 2024 under new battery rules

Cars, IRS clean vehicle tax credit, Tesla, tesla model 3 / /

FEOC —

Tesla’s website confirms the tax credit for the electric sedan is going away.

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Tesla Model 3 may lose $7,500 tax credit in 2024 under new battery rules

Jonathan Gitlin

Tesla has engaged in a series of price cuts over the past year or so, but it might soon want to think about making some more for the Model 3 sedan. According to the automaker’s website, the Tesla Model 3 Long Range and Tesla Model 3 Rear Wheel Drive will both lose eligibility for the $7,500 IRS clean vehicle tax credit at the start of 2024. (The Model 3 Performance may retain its eligibility.)

From Tesla's website.

From Tesla’s website.

Tesla

The beginning of 2023 saw the start of a new IRS clean vehicle tax credit meant to incentivize people by offsetting some of the higher purchase cost of an electric vehicle. The maximum credit is still $7,500—just like the program it replaced—but with a range of new conditions including income and MSRP caps, plus requirements for increasing the amount of each battery that must be refined and produced in North America.

A new hiccup appeared at the start of December 2023, though—in the form of new guidance from the US Treasury Department regarding “foreign entities of concern.”

China is one of those foreign entities of concern (along with Russia, North Korea, and Iran), and the new guidance says that an EV cannot be eligible for tax subsidies if the components were manufactured or assembled in those countries, or if some of the battery minerals were extracted or refined in those countries (beginning in 2025). It also applies to batteries made by companies that are owned or controlled by foreign entities of concern.

Given the high degree of Chinese state involvement in that country’s auto industry, this will probably mean that fewer EVs will qualify for the tax credit next year.

Tesla is not forthcoming on its site about the reason for losing the tax credit for these Model 3 variants, but it’s not the only automaker to face this problem. Ford also believes the Mustang Mach-E will lose its $3,750 tax credit eligibility on January 1, 2024.

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