Al Root

Proving a negative claim can be, well, impossible.

Stories late last week cited a lawsuit alleging Tesla speed up its odometers to avoid warranty claims. It's hard to say Tesla didn't do it. It's unlikely, but facts will eventually come out.

The question for investors is whether it will become a stock-level event. It almost certainly won't. Nervous investors can follow the issue, but they should worry more about earnings due Tuesday.

Tesla stock was down 3.5% in early trading on Monday at $232.88, while the S&P 500 and Dow Jones Industrial Average futures were down 1% and 0.9%, respectively.

Coming into the week, shares were down about 38% since Tesla reported its fourth-quarter earnings on January 29.

For the first quarter, Wall Street is expecting earnings per share of approximately 39 cents, according to FactSet, down from 45 cents in the first quarter of 2024. Estimates have been decreasing since the company reported first-quarter deliveries of approximately 337,000 vehicles, down from 387,000 a year ago and about 40,000 fewer than Wall Street had projected.

Earnings results and what company management says about the year ahead should drive the stock's movement this week. Investors can keep an eye on odometers.

Earlier in April, Nyree Hinton filed suit against Tesla alleging the company manipulated the odometer to avoid warranty claims, saying the odometer ran too fast, adding mileage. Tesla didn't respond to a request for comment. CEO Elon Musk responded to a tweet over the weekend calling the issue "idiotic."

Tampering with an odometer is serious. It's a crime. The National Highway Traffic Safety Administration estimates it costs car owners $1 billion annually. Typically, the form of the fraud is car owners rolling back mileage to get a better price on resale.

Given Musk's response, he sounds confident there is no systemic issue with Tesla odometers. Tesla's warranty expense doesn't raise a red flag. The company's warranty provision in 2024 was $2.7 billion, representing approximately 3.5% of its automotive sales of $77 billion. The 2023 provision was $2.3 billion.

The amounts look normal. General Motors' provision and adjustments to existing warranties totaled approximately $3.9 billion in 2024, accounting for about 2.3% of automotive sales.

Lawsuits aren't all that unusual for auto makers. GM, Ford Motor, and Stellantis have faced consumer lawsuits about data collection, parts, and safety risks.

Investors shouldn't ignore them, but they can spend most of their time worrying about other things.

Write to Al Root at allen.root@dowjones.com

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April 21, 2025 05:31 ET (09:31 GMT)

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