Dismissal secured: Tesla gets Model 3 lawsuit thrown out on shareholder claims

A lawsuit accusing Tesla of inflating its stock by pitching unattainable production numbers for its Model 3 sedan has been dismissed by a US judge in California.

In a decision published late last night, US district judge Charles Breyer said shareholders had not provided enough evidence to suggest Tesla needed to be clearer that Model 3 production could fail to reach its high targets.

Chief executive Elon Musk unveiled the Model 3 in March 2016 to widespread public approval, pitching it as an affordable electric car for everyday users.

However, Tesla experienced a number of setbacks when manufacturing the cars, turning to quick-fix measures such as building an extra tent at its Fremont factory site and dismissing nine per cent of its salaried staff to cut back on costs.

The company received deposits from more than 500,000 customers after the car formally launched in July 2017, largely powering a 62 per cent rise in its share price to date since its 2016 reveal.

Read more: Tesla shares fall as analysts cast doubt on Model 3 profitability

The news lightens the pressure on Musk at a time when Tesla faces a number of separate lawsuits and a federal investigation into whether he misled shareholders about having secured funding to take Tesla off the public stock market.

Musk first suggested he was considering taking the company private at $420 in a tweet on 7 August, with "funding secured". The Tesla boss later rowed back on his comments, explaining that he had merely received "strong support" from the Saudi Arabian Public Investment Fund for financing such a deal.

At the end of last week, Musk retracted his wish to take the firm private as a result of shareholder backlash, among other factors.

Read more: Elon Musk: Tesla to remain a public company

While shareholders had argued in the lawsuit that Musk knew Tesla was "woefully underprepared" to meet his production targets for the Model 3, Breyer said "federal securities laws do not punish companies for failing to achieve their targets".

Tesla shares remained largely unaffected in after-hours trading, having already taken a hit yesterday from Musk's decision to abandon a go-private transaction over the weekend.