Wednesday, 18 December 2013 23:50

NHTSA Says Safety Ratings Cannot Exceed 5 Stars

U.S. regulators blocked automakers from promoting vehicle safety ratings of more than 5 stars, three months after Tesla Motors Inc. touted an outsized score on its Model S electric car. The move adds to tension between the National Highway Traffic Safety Administration and Tesla, now grappling with bad publicity and a federal probe after a series of car fires raised questions about the safety of the Model S. Tesla said in late August that the Model S had achieved a score of 5.4 stars, a figure based on Tesla’s independent analysis of NHTSA data. Still, the statement prompted NHTSA, which issues the star ratings, to update its marketing guidelines. NHTSA now explicitly bars companies from promoting safety scores higher than 5 stars. The updated guidelines also state that the safety scores are always whole numbers.

“Tesla’s claim was an example of the potential confusion and inaccuracy that could be caused by incorrect use of the 5-Star ratings information in advertising and marketing statements,” NHTSA said in a statement.

Tesla declined to comment. The 5-star safety rating system has been used by NHTSA since model-year 1994 vehicles and the agency does not issue scores above that threshold.
“Advertisers who claim more than 5 stars are misleading the public,” NHTSA said, adding that violations could trigger action by federal or state authorities.

NTHSA launched a probe this week into the Model S following three car fires that raised questions about the safety of the car’s design.

Tesla CEO Elon Musk said in a blog post that the automaker requested the recall, but that statement was flatly denied by NHTSA administrator David Strickland.

The first fire was reported in early October and the bad publicity has lopped off more than 37 percent of Tesla’s market value since Oct. 1.

NHTSA’s investigation into the Model S could take up to six months and cost Tesla about $13 million, Barclays Capital analyst Brian Johnson said in a research note Wednesday.

“The monetary cost of a recall is likely manageable,” Johnson wrote. “The real issue is to what extent the publicity over the fire is likely to crimp Tesla Model S sales growth.”

In the past, highly publicized safety probes have led to a sales drop between 10 and 20 percent, Johnson said.

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