A Tesla Motors Inc. Model 3 vehicle stands outside the company’s Gigafactory in Sparks, Neveada, U.S. (Photographer: Troy Harvey/Bloomberg)

Tesla Says DOJ Sought Documents on Model 3 Production Guidance

(Bloomberg) -- Tesla Inc. was asked earlier this year by the U.S. Department of Justice for documents about its projections for the Model 3, the sedan that it struggled to manufacture last year.

The electric-car maker said Friday that it has cooperated and that it hasn’t received a subpoena or request for testimony. In a statement, Tesla defended its statements about the Model 3 in response to a Wall Street Journal report that said a criminal investigation of the company had intensified.

“When we started the Model 3 production ramp, we were transparent about how difficult it would be, openly explaining that we would only be able to go as fast as our least lucky or least successful supplier, and that we were entering ‘production hell,”’ Tesla said in the statement.

Tesla shares briefly erased a roughly 7 percent gain Friday afternoon after the Journal’s report, then resumed their advance. The stock finished up 5.1 percent and surged 27 percent for the week, buoyed by a blowout earnings report. It was the biggest weekly jump since May 2013.

Tesla Says DOJ Sought Documents on Model 3 Production Guidance

Federal Bureau of Investigation agents have contacted former Tesla employees to ask for testimony, the Journal said, citing unidentified people familiar with the matter. The ex-employees received subpoenas earlier in the probe, and agents have sought to interview several of them recently, according to the newspaper.

A representative for the U.S. Attorney’s Office in San Francisco didn’t respond to a request for comment.

Bloomberg News first reported in August that the U.S. Securities and Exchange Commission was scrutinizing Tesla’s public pronouncements on manufacturing goals and sales targets. The DOJ has also investigated statements that Chief Executive Officer Elon Musk made about trying to take the company private.

Shareholder Suit

Tesla shareholders earlier this month alleged in an amended class-action lawsuit that the company misled the public about Model 3 production. A federal judge dismissed the plaintiffs’ original complaint based on finding that failure to meet projections is only actionable in court if they weren’t accompanied by “meaningful qualifications.”

In their revised complaint, the shareholders said that they had spoken with multiple former employees at Tesla’s California assembly plant and Nevada battery factory who disputed claims the company had made about being on track to meet Model 3 targets by the end of 2017.

In August of that year, Musk said he was confident Tesla would be able to produce 1,500 Model 3s in the third quarter, and reach a run rate of 5,000 a week by the end of the year.

Two months later, Tesla announced that it had made only 260 Model 3s in the third quarter. The company manufactured fewer than 2,700 of the cars all of last year.

Musk, 47, made earlier predictions related to the Model 3 that were even more outlandish than the ones he gave last year. The CEO said during a May 2016 earnings call that Tesla would aim to produce 100,000 to 200,000 Model 3 sedans during the second half of 2017.

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