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A Better Partnership

Ahead of the Curve Auto Supplier Blog

June 08, 2017

Tesla Model 3: The Decision to Skip Prototype Testing Means Added Risk for Suppliers

Owners, operators, pedestrians and even suppliers, beware! Tesla’s CEO recently announced that Tesla is going to skip traditional prototype testing and go straight to production in order to make a September deadline to provide “production vehicles” to the nearly 300,000 beta-testers (I mean, purchasers) of this new vehicle.
 
Yes, you read that correctly. Tesla will not do any comprehensive vehicle level testing before selling its Tesla 3 to consumers, a decision that effectively makes the purchasers, operators, occupants, pedestrians and suppliers of the Tesla 3 guinea pigs.
 
Vehicles are designed and developed in parallel with the componentry incorporated into them. Of course, computer models can be run, material specs can be met, clearance stack-ups can be analyzed, heat patterns and vibrations can all be “modeled,” and should be. But it’s not until the entire vehicle is assembled and tested on actual roads, under normal and very extreme conditions for many miles, that the true performance and lack of “safety-related defects” can be determined. And as the industry knows all too well, safety-related defects can be deadly, which is what makes Tesla’s decision to go straight to production so astonishing.
 
So, for those in the general public, if you see a Tesla 3 coming down the road, be cautious. If you own one of these, make sure that your insurance coverage is relatively high, particularly if you plan on driving in autonomous mode with the current Tesla technology. And for suppliers in the Tesla supply chain, be certain that you have negotiated Tesla’s one-sided and onerous terms and conditions to better protect your company. At minimum, you should insist that any product-related exposure – whether a safety-related recall or a tradition warranty claim – is determined based on a robust joint root cause analysis of the system into which your parts are incorporated and that your total liability is limited if at all possible. That’s always important when dealing with any OEM. But, in the case of Tesla’s Model 3 and the added risk that suppliers will take on because that Model 3 has never been fully prototype tested before being sold to the general public, it’s even more critical.
 
To learn more about how to best position your company when doing business with Tesla or any other OEM, get in touch with one of Warner Norcross’ Automotive Industry Group attorneys.

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