FRANKFURT (Reuters) - Car rental company Nextmove has walked away from a 5 million euros ($5.55 million) order for 85 Tesla (O:TSLA) Model 3 electric vehicles following a dispute over how to fix quality issues, the German company said on Friday.
Nextmove said it had ordered 100 electric vehicles in 2018 but raised objections over quality and finish after taking delivery of the first 15 Model 3 cars earlier this year.
The rental company said following a dispute over how to resolve the quality shortcomings, Tesla triggered a refund clause but Tesla disputes that it canceled the order.
Tesla said Nextmove chose not to take delivery of the cars.
Nextmove said its Model 3 vehicles had paint defects, faulty wiring, scratches on the dashboard, faulty wheels and condensation in the headlights.
Offering faulty vehicles to rental customers would compromise Nextmove's reputation for quality, the German company said.
Tesla said it was in the process of resolving the issues and had provided replacement vehicles.
"We believe the customer's decision not to take delivery of its remaining Model 3 orders wasn't entirely due to quality issues, but was largely influenced by their frustration with an unrelated dispute from earlier in the year," Tesla said in a statement, without elaborating further.
Tesla said any customer who was unhappy with their car could return it for a full refund up to seven days after purchase.
It said customer satisfaction data showed that German customers have largely been satisfied with their vehicles, including the quality and condition of their cars upon delivery.
Tesla is counting on the Model 3 to help the company become profitable on a sustainable basis and transform it from a niche player to a heavyweight in the automobile industry. But Elon Musk has warned the company faced "manufacturing hell" as he has tried to scale up production of the Model 3.
Bloomberg news was first to report the cancellation of the 85 vehicles.