October 26, 2018 / 6:40 PM / 23 days ago

Tesla says has not received subpoena on Model 3 production

SAN FRANCISCO (Reuters) - Tesla Inc (TSLA.O) has not received a U.S. subpoena related to its Model 3 production forecasts, the electric carmaker said on Friday, following a report that it faced a deepening criminal probe about the projections.

The company has cooperated in responding to what it called a “voluntary request” for documents from the Department of Justice in September, a Tesla spokesperson said. The agency has the ability to press criminal charges.

“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 in an email.

The Federal Bureau of Investigation is examining whether Tesla misstated information about the production of its Model 3 sedans and misled investors about its business going back to early 2017, the Wall Street Journal reported, citing sources.

In recent weeks, FBI agents have contacted former Tesla employees to seek testimony in the criminal case, according to the report. The ex-employees received subpoenas earlier in the probe, and FBI agents recently have sought to interview a number of them, the sources said.

Any focus on Tesla’s past statements about Model 3 production targets would broaden the probe by the agency, which Tesla said last month was looking at statements made by Chief Executive Elon Musk about a go-private deal that was later called off.

Tesla first disclosed in September that the DoJ was investigating Musk’s tweets about having “funding secured” for a deal to take Tesla private, saying the agency had asked for documents about such statements.

FILE PHOTO: Rows of the new Tesla Model 3 electric vehicles are seen in Richmond, California, U.S., June 22, 2018. REUTERS/Stephen Lam/File Photo

Any expansion of the FBI’s probe comes as Musk faces pressure to deliver consistent production of the Model 3 at a profit. The company on Wednesday posted a profit and positive cash flow, making good on pledges made by Musk earlier this year, as the company ramps up volume of its new sedan.

MODEL 3 CHALLENGES

Tesla and Musk already face a proposed class action shareholder lawsuit claiming that the company and its top executives made false statements about the readiness of the Model 3 for volume production.

The car, which the money-losing company is banking on to turn a profit, was introduced to the public in early 2016 to great fanfare, with repeated promises throughout 2017 that Tesla was “on track” to build 5,000 Model 3s per week by the end of that year at its factory in Fremont, California.

Such statements were fraudulent, according to the lawsuit, given that the automated assembly lines to build the car in such volume were behind schedule.

Tesla has denied the claims in the lawsuit, saying it disclosed production bottlenecks once they were identified, and citing Musk’s public statements that the company was undergoing a period of “production hell” in 2017.

Tesla only reached a goal to build 5,000 Model 3s per week in June, although current production has fallen short of that.

Musk and Tesla only recently settled with the U.S. Securities and Exchange Commission over Musk’s Aug. 7 tweets. The SEC sued him for fraud, calling his claims “false and misleading,” before reaching a settlement.

Both Tesla and Musk must pay a $20 million fine, and Musk must give up his chairman role for three years as the company appoints an independent chair.

Shares of Tesla rose 4.5 to $329, extending their rally following bullish results on Wednesday.

Reporting by Arjun Panchadar in Bengaluru; Editing by Shounak Dasgupta, Sai Sachin Ravikumar and Richard Chang

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