A 2017 lawsuit shows how electric car startup Lordstown paid outside workers to gin up 10,000 pre-orders per year

Vice President Mike Pence at the Unveiling of the Lordstown Endurance_June 25, 2020
Vice President Mike Pence at the unveiling of the Lordstown Endurance.

  • A 2017 lawsuit shows how Lordstown Motors banked some pre-orders for its upcoming pickup truck.
  • The case reveals the company paid outside workers to generate up to 10,000 pre-orders per year.
  • Experts warn pre-orders and reservations are flawed measures of a startup’s potential.
  • See more stories on Insider’s business page.

Electric vehicle startup Lordstown Motors has been paying salespeople to secure pre-orders of its battery-powered truck prototype for at least five years – a practice that is outside the bounds of most startups without a sellable product – a little-noticed lawsuit from 2017 reveals.

In the suit, a former employee accused Workhorse Group, which Lordstown spun out of in 2019, of failing to pay him commissions he earned by logging over 8,000 pre-orders for the Endurance pickup truck now being offered by Lordstown. A recent report by Hindenburg Research noted the suit, but Insider is the first outlet to report its details and its implications both for Lordstown and the host of startups racing to meet growing demand for EVs.

Commissioning pre-orders is not illegal, but it should raise a major red flag for investors, said Gartner analyst Michael Ramsey.

While Lordstown’s practice appears unique in the EV startup world, experts warn that no matter how they’re collected, pre-orders and reservations aren’t great tools for predicting which young automakers will prosper. Because they’re typically non-binding, they don’t necessarily indicate what level of demand a vehicle will generate when it enters production. A startup’s success is better determined by its technology and talent than by a metric that hinges more on interest than intent.

Lordstown’s pre-order list ‘obviously does not indicate real demand’

Even with the electric vehicle market starting to grow, deep-pocketed investors are crucial to any startup. It takes billions of dollars to launch an automaker. The industry’s history is littered with failures, and most of today’s startups will likely flounder before their products hit the market, according to risk consulting firm Guidehouse.

To attract capital, many fledgling automakers use pre-order figures as a proxy for the demand their future vehicles will command. Tesla in particular has a long history of doing this. The problem is that these orders represent a consumer’s interest in actually buying the vehicle once it reaches the market – not their commitment to do so.

The fact that Lordstown paid commissions for bringing in these orders further undermines the figures’ credibility, Ramsey said. “It obviously does not indicate real demand,” he told Insider.

Lordstown Motors has been commissioning pre-orders for years

The idea for Lordstown Motors originated at Workhorse Group. In 2019, Workhorse CEO Steve Burns left the startup. He bought the patent for its electric pickup, along with thousands of pre-orders for it, and made it the basis for a new company, Lordstown.

Workhorse Truck
Workhorse Truck

Today, Lordstown boasts more than 100,000 pre-orders for the pickup. That’s impressive when compared to those for similar EV startups like Lucid Motors and Fisker, which have about 8,000 and 14,000 pre-orders, respectively.

In March, short-selling firm Hindenburg Research became the first to report on the questionability of Lordstown’s pre-orders, calling them “largely fictitious” and an attempt to “mislead” investors. The company’s stock fell 16% the day after the report was released and continued to slide.

At the time, Burns responded that the company has been transparent with the status of its orders. He also reiterated Lordstown’s plans to release the electric pickup truck in September.

Pre-orders were heavily incentivized

The 2017 lawsuit was filed against Workhorse by its former director of fleet sales, Jeffrey Esfeld. When he was hired in 2016, Esfeld said, he was tasked with securing up to 10,000 pre-orders per year. In just over a year, he logged more than 8,000 pre-orders, according to the court document. That number alone would account for over 8% of Lordstown’s current pre-orders to date. A Lordstown spokesperson would not confirm whether signatures gathered by Workhorse Group in 2016 are part of that total. (Esfeld declined a request for comment from Insider.)

Esfeld received a commission of roughly $30 per vehicle for each signed pre-order, according to the suit, on top of his $100,000 base salary. He would also receive a commission of 0.14% of the vehicle’s sale price for pre-orders that officially became sales. He was one of several employees that worked specifically on obtaining pre-orders for the truck.

During his time at the company, Esfeld was paid commissions for 3,050 vehicle pre-orders, from companies including Duke Energy and American Electric Power. (The case also notes Esfeld had been working to win over Amazon, which ultimately agreed to buy 100,000 electric delivery vans from Lordstown rival Rivian.) But, he alleged, after laying him off in 2017, Workhorse failed to pay him $440,707 he had earned in commissions, representing about 5,000 pre-orders, including from Ryder, one of Lordstown’s biggest pre-order signees to date. (He ultimately won the suit, and Workhorse paid him an agreed upon amount of $87,000 in damages and $32,245.02 in attorneys’ fees and costs.)

Steve Burns Workhorse
Steve Burns at Workhorse Group

The practice continued at Lordstown. In 2020, the startup hired consulting group Climb2Glory to commission orders, according to Hindenburg Research. On a page that was deleted after the short-seller’s report was released, Climb2Glory referenced how it helped Lordstown generate pre-orders.

Workhorse Group, Lordstown Motors, and Climb2Glory did not respond to requests for comment from Insider.

A questionable spin on a questionable practice

The Workhorse and Lordstown policy of paying commissions for pre-orders appears rare. “This is the first time I’ve heard of a start-up in that space doing anything like that,” Pitchbook analyst Asad Hussain told Insider. Comparable electric car startups, including Rivian, Lucid Motors, Fisker, and Nikola, do not pay commissions for pre-orders or contract workers to secure them, Insider found.

In recent automotive history, Elon Musk set the standard of using pre-orders to preview sales figures. “Tesla’s reservations taught the industry that this is a way to develop credibility with investors,” Ramsey said. But while it once charged $50,000 to pre-order a Roadster, it now asks a mere $100 from someone who wants a Cybertruck. That’s comparable to (usually refundable) reservation fees charged by the likes of Fisker ($250) and Lucid Motors ($300).

That lesson isn’t necessarily a good one, Ramsey said. “Investors need to think long and hard about the viability of the pre-orders that any of these startups are touting.”

Hussain told Insider that investors need to focus more on technology and execution, rather than “propaganda.” He thinks the Wall Street trend of using special-purpose acquisition companies to go public has put a lot of companies, like Lordstown Motors, in a position they’re not mature enough for yet.

Endurance electric pickup truck by Lordstown Motors
Steve Burns with Lordstown’s Endurance.

“The ability for early stage startups to go to market, even without revenue, creates a double-edged sword,” Hussain told Insider. “It allows everyday people to gain access to disruptive technologies like electric cars, but it also puts new companies and investors in a precarious position – how can they prove there will be demand for their product, without revenue? That’s where pre-orders can get tricky.”

For Lordstown, reliance on pre-orders has put it in the crosshairs of notorious short-seller Hindenburg Research. Just last fall, the same group released a damning report on Nikola that caused the company’s stock to plummet and its CEO Trevor Milton to step down. Currently, Lordstown is under investigation by the Securities and Exchange Commission for its pre-order practices. Its stock is trading at around $9, down from a high of $30 in February.

“A lot of these companies tout non-binding pre-orders or reservations,” Hussain said. “But, if you’re actually paying for them [the pre-orders] it does bring up some questions and it is not characteristic of the space.”

“The key question mark for many of these startups is: Can you actually get your factories up and running? Can you actually manufacture those vehicles?”

Mark Matousek contributed reporting.

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Toyota has unveiled the first of 15 new electric vehicles it plans to sell by 2025

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  • Toyota unveiled its new electric SUV at the 2021 Shanghai Auto Show.
  • The car is similar to a RAV4 in design, but rides lower and has a yoke steering wheel.
  • The new EV is one of 15 the company plans to make by 2025.
  • See more stories on Insider’s business page.

Toyota debuted its new all-electric SUV concept car on Monday at the 2021 Shanghai Auto Show.

The Toyota bZ4X is the first electric car under the company’s new Beyond Zero (bZ) lineup of cars with zero carbon emissions. It is the first of 15 fully electric cars the company plans to make by 2025 and one of seven under the bZ badge, according to a statement from CTO Masahiko Maeda.

The car is a compact SUV that looks similar to Toyota’s RAV4, but rides lower to the ground and features a longer wheelbase.

It’s the first car to be built on Toyota’s new electric e-TNGA BEV platform that the company created jointly with Subaru. Subaru is expected to unveil its own electric car on the platform shortly.

Toyota_bZ4X_Concept_006

The new car has several distinctive features, including a system that can use solar power to alleviate the impact of cold weather on the vehicle’s range, as well as yoke instead of a typical steering wheel. The car’s interior also has a large touchscreen.

The car company plans to manufacture the car in Japan and China. It should be available globally by the middle of 2022, according to the company.

Interior concept design of bZ4X

Toyota has not announced how far the car will be able to travel on a full charge, but it will likely be competitive with other EVs on the market, including the Ford Mustang Mach-E which has a range of over 300 miles.

Toyota also did not attach a price estimate to the car, but CarandDriver.com reported the vehicle may sell for about $40,000 – a similar price to Toyota’s RAV4 hybrid.

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Tesla raised the prices of its Model 3 and Model Y cars by $500, its 4th price change of the year

elon musk
Tesla CEO Elon Musk.

  • Tesla lifted the prices of its Model 3 Standard Range Plus, Model 3 Long Range AWD, and Model Y Long Range AWD by $500.
  • It also raised the price of its Model 3 Performance by $1,000, to $56,990.
  • It’s the fourth price change of the year for Tesla vehicles.
  • See more stories on Insider’s business page.

Tesla can’t make up its mind on how much its electric vehicles should cost.

Electrek first reported Friday that Tesla had once again hiked up the US prices of its Model 3 and Model Y cars – marking its fourth price change in 2021 so far.

The Model 3, its cheapest sedan, has been hit by the most price changes this year. In the latest change, Tesla raised the price of the Standard Range Plus from $37,990 to $38,490, and the Long Range AWD from $46,990 to $47,490. The Performance version had an even bigger increase, from $55,990 to $56,990.

Read more: Apple will never deliver a car because it can’t figure out how to work with the automakers who could make it happen

The automaker also raised the price of its Model Y Long Range AWD from $49,990 to $50,490.

Electrek also noted that the Model 3 price hike was accompanied by a small design update, adding a new wooden door trim, which Tesla had already rolled out on Model 3 vehicles produced at its Shanghai, China Gigafactory.

Tesla Model 3 trim
Tesla Model 3s in the US now come with a wooden door panel.

Customers told CNBC that Tesla had double-charged for new cars in mid-March, leaving them with bills of up to $142,000.

A Tesla customer, Terry Oelschlaeger, told Insider’s Kate Duffy he was double-charged for a Tesla Model Y costing nearly $54,000 on March 25, and that a Tesla service center employee told him the error had affected “many” buyers.

The company has since refunded the customers, including Oelschlaeger, and offered them $200 in credit at its online store.

Tesla posted record sales in the first quarter of 2021 despite a worldwide shortage of semiconductor chips. It sold 184,800 vehicles in the first three months of 2021, and Wall Street now expects the electric-vehicle company to sell more than 800,000 cars this year.

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Tesla refunded customers who were overcharged up to $71,000 on new cars, and gave them $200 to spend at its online store

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Tesla CEO Elon Musk.

  • Tesla customers who were charged twice for a new car were refunded the extra money a week later, CNBC reported.
  • Tesla offered the customers $200 in credit to spend at the company’s online store.
  • The buyers were left with bills of up to $142,000, and were charged for overdraft fees.
  • See more stories on Insider’s business page.

Tesla has refunded customers who were double-charged for new electric cars in mid-March, and has offered them $200 in credit at its online store, six people told CNBC on Wednesday.

Tesla refunded the extra money about a week after the customers told CNBC that Tesla had charged them twice without authorization and left them with bills of up to $142,000.

The customers said they received the money back on their double charges on or before April 1, but that they also had to pay for overdraft fees from their large bills.

Elon Musk’s car company sent the overcharged customers an email, which they shared with CNBC, that apologized and gave them $200 in credit. Tesla said the credit must be used in a single transaction, would expire on January 30, 2022, and couldn’t be spent on Tesla Tequila.

Tesla didn’t immediately respond to Insider’s request for comment.

Three California-based Tesla customers first shared their stories with CNBC in March. CNBC’s journalists reviewed their purchase agreements, correspondence with Tesla, and bank statements.

Clark Peterson, Tom Slattery, and Christopher T. Lee initially told CNBC they had purchased Teslas ranging from $37,000, the price of a Model 3 sedan, to $71,000, the cost of a Model Y crossover SUV with premium features.

A former banking executive from North Carolina, who wanted to remain anonymous for privacy reasons, also told CNBC he was charged twice for a new Model Y costing about $54,000.

Read more: DeepMind’s cofounder partied with Elon Musk for his raucous 40th birthday party on the Orient Express, a new book revealed

These buyers all authorized the payment of their brand-new electric vehicles through ACH direct debit, but the next day found that the money had been taken from their account twice, meaning in total they had spent between $74,000 and $142,000 on the cars.

Now they’ve been refunded, they said Tesla customer service needs to improve.

Peterson told CNBC: “While happy to have the whole situation sorted, I still feel that the response time was inadequate. It took days before Tesla had any kind of response, and they were holding our significant funds the whole time. And it took them five minutes to take those funds from our account.”

Another Tesla customer, Terry Oelschlaeger, told Insider he was also double-charged for a Tesla Model Y costing $53,993.70 on March 25. He shared his bank statement with Insider, showing a duplicate charge for a new car.

Oelschlaeger said he phoned the company three times to complain and drove to a Tesla service center in California, where an employee told him the error had impacted “many” buyers.

The company told him the refund would arrive in his bank account in one to three business days. He eventually received a payment in full from Tesla on March 31.

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Energy-tech firm Romeo Power surges 55% after inking deal to provide battery packs to heavy-truck giant Paccar

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Autonomous Peterbilt 579 Test Vehicle with Aurora Driver

Shares of Romeo Power surged to an intraday high of 55% on Tuesday after the energy-technology company announced inking a five-year deal to provide battery packs, modules, and battery management systems to the electric vehicles of Paccar, one of the world’s largest manufacturers of medium- and heavy-duty trucks.

“Romeo Power’s battery technology solutions will enable PACCAR to deliver state-of-the-art transportation solutions that enhance customers’ operations and environmental impact,” Darrin Siver, Paccar senior vice president, said in a statement Tuesday.

Shares of Romero Power climbed steadily to their highest in two weeks after the announcement was made at 7 a.m. ET. Trading volume grew to 129.54 million shares compared to the 6.48 million average.

Founded in 2016, the Los Angeles-based Romeo Power focuses on creating lithium-ion battery modules and packs used in electric vehicles. The manufacturing company went public through a blank check merger in December 2020.

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Apple CEO Tim Cook says he’s never met Elon Musk but has ‘great admiration and respect’ for Tesla

Tesla CEO Elon Musk, Apple CEO Tim Cook.
Tesla CEO Elon Musk (left) and Apple CEO Tim Cook.

  • Apple CEO Tim Cook said Monday that he’d never met Elon Musk.
  • He said that Musk’s electric-vehicle company Tesla had done “an unbelievable job.”
  • Apple reportedly plans to enter the EV market with its own autonomous vehicle.
  • See more stories on Insider’s business page.

Apple CEO Tim Cook praised electric-vehicle company Tesla on Monday, but said that he hasn’t yet met its CEO Elon Musk.

Cook’s comments came less than two weeks after Musk posted, then deleted, a tweet implying Tesla could be bigger than Apple “within a few months.”

Cook told The New York Times’ Kara Swisher: “You know, I’ve never spoken to Elon, although I have great admiration and respect for the company he’s built.

“I think Tesla has done an unbelievable job of not only establishing the lead, but keeping the lead for such a long period of time in the EV space,” he added.

Tesla and Apple don’t directly compete – but this could soon change. Apple reportedly plans to build an autonomous electric car by 2024, and during Monday’s interview Cook hinted that the project was real. Apple has recently patented some vehicle features.

Musk said in December that he once wanted Apple to buy Tesla for a tenth of the company’s 2020 value, but that Cook wouldn’t meet with him.

Read more: Apple will never deliver a car because it can’t figure out how to work with the automakers who could make it happen

Tesla posted record sales in the first quarter of 2021 despite a worldwide shortage of semiconductor chips. Wall Street now expects Tesla to sell more than 800,000 vehicles this year.

Musk has famously clashed with other US business leaders including Amazon CEO Jeff Bezos, Microsoft co-founder Bill Gates, and Facebook CEO Mark Zuckerberg.

Read the original article on Business Insider

Tesla may be losing its electric-vehicle crown as Ford’s Mustang Mach-E sales heat up

Mustang Mach E GT Performance Edition 03
Mustang Mach-E GT Performance Edition.

  • Tesla’s share of the US electric-car market fell from 81% to 69% in February.
  • The Mustang Mach-E was nearly the sole reason for Tesla’s market-share losses.
  • Ford’s new electric car has been widely successful, winning awards and Wall Street’s approval.
  • Visit the Business section of Insider for more stories.

Ford’s electric Mustang Mach-E appears to be cutting into Tesla’s comfortable lead in the electric-vehicle market right out of the gate.

The Mustang Mach-E was the third highest selling electric car model in the US in its first full months of sales, according to a report from Morgan Stanley on Thursday. The car trailed behind Tesla’s Model 3 and Model Y in February.

While Ford has only sold 6,614 units of the new SUVs to date, Tesla’s share of the US electric-car market fell to 69% in February, down from 81% in the prior year, an earlier Morgan Stanley report dated March 3 found. What’s more, the Mustang accounted for nearly all of Tesla’s market-share losses, the bank said.

Ford’s first-quarter vehicle sales were up over 23% year-over-year, the automaker said Thursday, with electrified vehicle sales rising 74%, thanks mainly to the Mustang Mach-E and F-150 PowerBoost Hybrid sales.

Tesla’s first quarter numbers are expected to be released as soon as Thursday afternoon.

Despite the new competition – of which Ford is far from the only source – Morgan Stanley’s analysis found that Tesla’s US sales are still on the rise, with more car buyers continuing to look into purchasing an electric vehicle. EV sales in the US climbed 34% in February from the previous year, while traditional internal-combustion-engine-car sales dropped 5.4%.

One-fifth of the Mustang Mach-E’s sold in February were in California, Ford said, a key market for the industry. In 2019, the state accounted for nearly half of Tesla’s Model 3 sales.

So far, the Mach-E appears to be a success. The car was awarded SUV of the year by the North American Car, Truck, and Utility Vehicle of the Year Award in January, and early testers – including other Wall Street analysts – also gave it positive marks. JPMorgan said the vehicle could challenge Tesla inasmuch as Ford has more history and brand recognition.

“We do not aim to argue that one vehicle is necessarily superior to the other (many consumers will continue to prefer the Model Y’s greater availability of semi-autonomous driving features and Tesla brand, while others will be attracted to the Mach-E’s styling and availability of a $7,500 federal tax credit),” they said.

In March, Tesla CEO Elon Musk seemed to compliment Ford’s role in the electric-car market.

“Tesla & Ford are the only American carmakers not to have gone bankrupt out of 1000’s of car startups,” he tweeted in response to a reporter’s post about the high-risk nature of the automobile industry. “Prototypes are easy, production is hard & being cash flow positive is excruciating.”

Some experts doubt Tesla can stay on top forever

Early Tesla investor and former board member Steve Westly told CNBC that competition was encroaching on the electric-car company from all sides.

“Tesla is not going to be king of the hill in electric forever,” he told CNBC last month.

Other car companies have also begun to crowd the market, from electric-car startups like Lucid Motors, Fisker, and Rivian to more established car companies like General Motors and Volkswagen.

In February, a J.D. Power survey of new car buyers found that many people looking to buy electric cars were considering companies outside of Tesla.

“One could argue this indicates that, while Tesla’s appeal is clearly formidable, it’s not absolute and could be displaced by a worthy alternative,” said Stewart Stropp, senior director of automotive retail at J.D. Power, in the survey.

Despite doubts as to the future of Tesla’s role in the EV market, Tesla’s shares have risen more than 650% in the past year in a vote of confidence from investors. The company’s revenue increased in 2020 from $24.6 billion to $31.5 billion, but it missed Wall Street’s fourth-quarter projections by 20%.

The company is working to compete in the market. The carmaker plans to design a $25,000 car and has expanded its manufacturing plants into China, building a Shanghai Gigafactory.

China is likely to remain a key market for Tesla and the industry at large. In 2020, Tesla doubled its revenue there.

“China is the linchpin of growth for EV market,” Dan Ives, an analyst at Wedbush, told clients in March. “We believe China could see eye-popping demand into 2021 and 2022 across the board, with Tesla’s flagship Giga 3 footprint a major competitive advantage.”

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Some Tesla cars, including the Model Y Performance, fell behind their EPA range in a new study that even took their safety buffer into account

Elon Musk
Tesla CEO Elon Musk.

  • A new study by Edmunds suggests that the ranges of Tesla’s cars fall below their EPA estimates.
  • Tesla had disputed Edmunds’ initial results, so it retested the cars – and got similar findings.
  • Some models don’t meet the estimate even when its safety buffer is included.
  • See more stories on Insider’s business page.

The real battery ranges of Tesla’s electric vehicles fall below their official EPA estimates, according to a new study by Edmunds.

For some models, this remains the case even when a range of caveats are met, including the cars’ safety buffers.

In February, Edmunds tested a range of electric vehicles from makers including Tesla, Ford, and Volkswagen against their EPA-estimated range. Though Tesla’s Model 3 Long Range came out on top overall, Edmunds found that each of the five Teslas it tested failed ultimately to hit their estimates.

Tesla then directly got into contact with it to dispute the results, Edmunds said.

Read more: Elon Musk’s mastery of memes proves Tesla will never have to pay for traditional marketing

Tesla told Edmunds that the full range of its vehicles’ batteries was not being accounted for because Edmunds hadn’t included the safety buffer, which are the additional miles a car can travel even after it indicates it’s reached zero range.

Tesla told Edmunds that if it included the safety buffer and drove the cars until they could physically move no longer, its vehicles would match the EPA figures.

So Edmunds retested the vehicles.

Edmunds first tested the cars on a testing ground, because “driving a group of EVs to a stop on a public road is far from advisable,” it said.

It tested a 2020 Model 3 Standard Range Plus, a 2021 Model 3 Long Range, and a 2020 Model Y Performance, alongside two control vehicles from Ford and Volkswagen.

Edmunds said that range meters often take recent driving habits into account when forecasting remaining range, so it set a range of control criteria.

These included charging the vehicles to 100% overnight, setting the cars’ climate control to the same temperature and keeping the audio systems off to conserve power, and driving at a constant speed of 65 mph – the average speed limit for urban interstate highways in the US.

Edmunds measured how far each vehicle could go until its battery completely stopped, which it said was the basis of Tesla’s challenge.

But Edmunds also measured how far each car could drive after it reached an indicated zero miles while still maintaining 65 mph, which it classed as a “more realistic endpoint.”

“If a vehicle isn’t able to maintain a safe highway speed (65 mph) on a flat road like at our test facility, then it’s probably unsafe to be on public roads,” Edmunds wrote in its analysis.

Edmunds then tested the 2021 Model 3 Long Range and 2020 Model Y Performance on its own standardized test route, which is 60% city and 40% highway. Edmunds said it expected the vehicles to have a bigger safety buffer range on this route, because most electric vehicles are less efficient at highway speeds than in the city.

But Edmunds said it was surprised to find that both Teslas actually had shorter buffer ranges in the second test.

Tesla told Edmunds that “the buffer cannot be defined exactly to a number every time.” Its engineers said that the buffer changed based on external conditions and driving style.

The engineers also said the range remaining is a software estimate, and that these are conservative “so there’s always some energy left to help get drivers to the next charging point when needed.”

Edmunds concluded that the 2021 Model 3 Long Range and Tesla Model S Performance do meet their EPA range estimates in real-world conditions, but only if they meet caveats such as being driven beyond the point where the indicated range drops to zero and without too many extra facilities using its power, such as strong climate settings. Edmunds also found that the cars would only reach their range if they’re charged to 100% battery capacity – which it said Tesla does not recommend for daily use.

Even under these conditions, the 2020 Model 3 Standard Range Plus, 2020 Model Y Performance, and 2018 Model 3 Performance wouldn’t meet their EPA targets, Edmunds said.

The 2020 Model Y Performance, for example, has an EPA-estimated range of 291 miles. In Edmunds’ initial test in February, its range to indicated zero was actually 263 miles – 28 miles less. On the testing ground, it only traveled a further 12.6 miles after reaching indicated zero range. On Edmunds’ test loop, which has more city conditions, it traveled a further 11.1 miles.

Edmunds added that many drivers wouldn’t expect an electric vehicle’s buffer range to be included in the EPA’s range estimate, and that it’s difficult to know how much extra range there is beyond an indicated zero. Edmunds also said that using a car’s buffer range regularly could increase charging time and potentially run down batteries quicker.

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Consumer Reports says Tesla’s cameras inside its cars, which transmit video footage of passengers, could pose a privacy risk

Elon Musk
  • Several Tesla models record and transmit video of drivers and passengers via in-car cameras.
  • Tesla cars have up to 9 cameras encompassing both the outside and inside of the car.
  • Consumer Reports said the in-car camera opens drivers up to serious privacy concerns.
  • See more stories on Insider’s business page.

Several Tesla vehicle models, including the Model 3 and Model Y, record and transmit video footage of drivers and passengers via in-car cameras. The cameras are designed to help Tesla develop its full-self driving software, but present a serious privacy risk, according to Consumer Reports.

John Davisson, senior counsel at the Electronic Privacy Information Center (EPIC), told Consumer Reports the footage opens Tesla drivers up to a whole host of privacy concerns, including the potential for outside parties to gain access to the data for malicious purposes, as well as Tesla itself using the data for its own gain.

“It may later be repurposed for a system that is designed to track the behaviors of the driver, potentially for other business purposes,” Davisson told Consumer Reports.

Jake Fisher, senior director of Consumer Reports’ auto-test center, told Insider the most concerning aspect of their investigation into the cameras was that Tesla was not being entirely transparent about how the cameras were being used.

“Tesla could be using these cameras to stop crashes and they’re using it for studies, to help Tesla develop more things,” Fisher told Insider. “Tesla is the only automaker that has hardware that could help stop crashes, but isn’t using it for the driver’s safety.”

Tesla did not immediately respond to a request for comment on the report.

Tesla CEO Elon Musk said on Twitter that Tesla has used the in-car cameras to remove its full self-driving software from drivers that “did not pay sufficient attention to the road.”

Musk confirmed the company was using the in-car cameras to determine eligibility for the FSD software, when asked by another Twitter user.

Other car companies, including BMW, Ford and General Motors have elaborate driver monitoring systems, but they have focused the systems on driver safety over collecting data. Consumer Reports notes the car companies do not record, save or transmit the data and use infrared technology to identify a driver’s eye movements or head position instead of video cameras.

While Tesla does not use the in-car cameras to alert the driver to potential safety concerns, the company does use a real-time driver-engagement tool via steering wheel inputs that analyze the amount of pressure put on the wheel to keep drivers alert.

Consumer Reports said the steering wheel inputs can be easily tricked. “Just because a driver’s hands are on the wheel doesn’t mean their attention is on the road,” said Kelly Funkhouser, program manager for vehicle interface testing at Consumer Reports. Fisher told Insider in-car cameras could help save a lot of lives.

Tesla drivers can opt-out of sharing the in-car videos via their control settings and the Cabin Camera is disabled by default. According to Tesla’s site, the camera will only turn on before a crash or automatic emergency braking (AEB) activation.

China has also expressed concern regarding cameras on Tesla cars. In March, China banned Tesla cars in military complexes due to concerns about the company monitoring drivers via the car’s cameras.

In response, Musk said on Twitter that the company would be shut down if it was spying on Chinese officials.

While Tesla’s Model 3 made the Consumer Reports’ “Top Picks” list last year, the publication removed its recommendation for the Model S, citing issues with its suspension and electronics. Consumer Reports also criticized Tesla’s Model Y in November for body hardware and paint issues.

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Volkswagen rallies as much as 8.8% as investors buy into its plans to rival Tesla for electric vehicle dominance

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A Volkswagen worker works on the ID 3, one of Volkswagen’s electric cars.

German car manufacturer Volkswagen rose by as much as 8.8% on Wednesday, extending the gains made the day before when it unveiled its plans for expansion in the electric vehicle market that could make it the world’s leading producer.

Shares were up as much as 8.8% at one point, at 291 euros ($346), their highest since November 2008 and set for a 25% gain so far this week. Volkswagen’s US-listed shares closed 10% higher on Tuesday.

At its “Power Day” on Monday, Volkswagen said it would build six electric vehicle battery factories across Europe and produce predominantly electric cars by 2030. This has triggered a surge in the value of its shares.

Volkswagen also stated it could significantly reduce battery production costs, which in turn would drive down electric vehicle retail prices, and invest into building an electric vehicle software infrastructure to be used across all of its brands.

Disruption in supply chains through factory closures, manufacturing interruptions and delivery delays have put pressure on the car manufacturing industry throughout the pandemic.

By shifting its focus towards electric vehicles over the past year and effectively emulating Tesla’s strategy, Europe’s largest carmaker has gained back a significant amount of ground. Volkswagen shares have risen by 180% since the market crash in March last year.

The company is aiming to dethrone Tesla as the global leading manufacturer of electric vehicles: “Our goal is to secure a pole position,” said Herbert Diess, CEO of Volkswagen, on “Power Day”.

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