Safety regulators warned Tesla over 'misleading claims,' documents reveal

'Not the first time' the agency felt Tesla ignored its guidelines.
Image: Tesla Motors CEO Elon Musk
Tesla Motors CEO Elon Musk.Brian Snyder / Reuters file

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By Paul A. Eisenstein

Federal safety regulators sent Tesla CEO Elon Musk a cease-and-desist letter over "misleading claims" the automaker made about its company's Model 3 last year, a new cache of documents revealed this week.

On Wednesday, the legal transparency group PlainSite published a set of documents released by the National Highway Traffic Safety Administration under a Freedom of Information Act, or FoIA, request.

They show that the National Highway Traffic Safety Administration took steps to address what it called “a number of misleading statements” by the automaker, such as exaggerating the safety level of Tesla vehicles.

Tesla and Musk made that and other claims in a series of blog posts following the NHTSA’s move to award a 5-star rating to the Model 3 following a series of crash tests.

The Model 3 did earn the highest-level rating NHTSA gives after its crash tests, and it scored record high numbers on some of the individual tests. But that brought a quick pushback from the safety agency, which first issued a statement asserting that there is "no 'safest' vehicle among those vehicles achieving 5-star ratings."

In a letter to Musk from October 2018, NHTSA Chief Counsel Jonathan Morrison called on the automaker to cease and desist making claims that the Model 3 was safer than any other vehicle ever tested.

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It was “not the first time” the agency felt Tesla had ignored its guidelines “in a manner that may lead to consumer confusion and give Tesla an unfair market advantage,” according to the documents obtained by PlainSite.

"Tesla's blog statements are entirely based on actual test results and NHTSA's own calculations for determining relative risk of injury and probability of injury," the company's general counsel replied in a letter the same month.

"Based on the foregoing, we do not see a reason to discontinue use of our safety blog or these statements as long as no other vehicle surpasses” the results of the Model 3 crash tests, the automaker continued.

Tesla has appeared to downplay its comments based on subsequent blog posts and other published comments.

The battle over how Tesla could promote the NHTSA’s crash test results marks just one of many disputes between the automaker and various government agencies. Tesla previously decided to stop participating in a federal probe of a fatal crash involving one of its vehicles operating in autopilot mode because of a dispute over the government-led process.

Tesla and Musk have faced off with the Securities and Exchange Commission several times, as well, the CEO derisively referring to the agency last year as the “Short-sellers Enrichment Commission,” referencing investors betting on a stock’s decline

Musk, 47, was forced to relinquish his post as chairman of the automaker as a result of his claims, announced via tweet, to have lined up funding to take Tesla private last year.

He faced the prospect of being forced out of the company entirely when the SEC subsequently accused him of violating the terms of their settlement. Musk settled the SEC lawsuit by agreeing to run by Tesla lawyers any public statement that might materially impact its stock.

In its letter to Tesla last October, the NHTSA said it was referring its concerns about Tesla’s safety claims to the Federal Trade Commission’s Bureau of Consumer Protection. The FTC hasn't released any material on possible actions against Tesla, despite another FoIA request by PlainSite.

Tesla’s “false and misleading claims” pose a challenge for investors, Thomas Farley, former CEO of the New York Stock Exchange, told CNBC.

“How do you even triage the false and misleading claims that come out of Tesla to decide which ones to take issue with?"