Tesla's 'Extreme' Success in Norway Becomes Double-Edged Sword

In one of Tesla's biggest markets, it's been stung by its own success.

The company has struggled to build up operations to match sales in Norway, which leads the world in electric vehicles per inhabitant. As a result, customers have started to complain about bad service.

Norway is closely watched for signs of how the transportation industry is adapting to the energy transition. After Tesla rolled out an unprecedented wave of its new Model 3 in the Nordic country earlier this year, customers and observers are keen to see how it's scaling up already stretched local operations.

The boom is proving troublesome and Tesla is struggling to cope with its meteoric rise in Norway with the most consumer disputes per unit of any car-maker. The total number of complaints is likely to rise this year due to issues with Model 3s, including dents and sloppy paint jobs, according to Norway's consumer watchdog.

But the good news is that the ratio of complaints per vehicle is set to drop after the number of Teslas in Norway surged by more than 25% to almost 40,000 so far this year. Measures to improve service capacity are having an impact, according to Thomas Iversen, a senior legal adviser at the Norwegian Consumer Council.

"Tesla is working hard to get there, but they have an extreme growth rate," he said by phone on Tuesday. "That makes it hard to keep up."

Tesla acknowledged its problems, but also pointed to a recent survey showing its customers are satisfied as well as its unmissable presence on the roads as a sign of popularity. The company has fulfilled a promise in Norway by doubling its customer service staff and is opening new service centres, running double shifts and offering mobile services, according to a local Tesla spokesman.

The company is also struggling globally, with the share down almost 50% from a peak in August amid concerns over Model 3 output and consumer demand.

Norway's consumer watchdog has this year taken on 51 cases mediating between customers and Tesla, meaning the annual total is likely to exceed the 86 registered last year. Tesla's complaints per unit in 2018 were more than three times higher than the average both for electric cars and cars in total.

While Tesla retained four out of five stars in the BI Norwegian Business School's consumer-satisfaction survey published earlier this month, its service woes led it to plunge to 51st from 4th position a year earlier.

Most of this year's complaints are related to minor issues on the new Model 3s, which account for 87% of the 7,835 Teslas registered in Norway through April. That shows the company still has capacity problems even after doubling service staff last year, the consumer council's Iversen said.

"There's a lot of small things that Tesla isn't able to resolve and that creates frustration," he said.

After Tesla's global deliveries in the first quarter suffered a record decline, the company is under pressure to deliver on targets for the year as a whole. That urgency could be to blame for poor paint jobs, scratches and dents on some Model 3s, said Satheesh Varadharajan, president of the Tesla Owners Club Norway, which has about 1,500 members.

"There might have been some haste in completion and inspections from Tesla's side," he said in a phone interview. "They're very focused on meeting their delivery targets. But that can unfortunately come at the expense of quality."

© 2019 Bloomberg