Tesla Inc (TSLA) will pay $1.5 million in settlement over claims a software update temporarily reduced maximum battery charging speed, capacity and range temporarily in 1,743 Model S sedans, Reuters reported Thursday, citing court documents. 

What Happened: Vehicle owners will get a compensation of $625 each. The suit which was filed in August 2019 said Tesla’s over-the-air software update reduced the maximum voltage to which batteries on some Tesla Model S vehicles could be charged.

The $1.5 million settlement includes $410,000 fees and costs for the plaintiffs' attorneys. As per the documents, 1,552 vehicles had maximum battery voltage fully restored and 57 have had battery replacements — for other vehicles, the maximum voltage should continue to be restored over time.

Why It Matters: As per the claim, the voltage limitation was temporary, with a 10% reduction lasting about 3 months, and a smaller 7% reduction lasting another 7 months before the corrective update was released in March 2020.

A subsequent update restored about 3% of the battery voltage in these vehicles, and a third update released in March 2020 was designed to fully restore the batteries’ voltage over time as the vehicles are driven, as per Reuters.

In 2019, after a Model S vehicle caught fire in Hong Kong, Tesla said it was revising charge and thermal management settings on Model S and Model X vehicles via an over-the-air software update to help further protect the battery and improve battery longevity.

Price Action: TSLA shares closed 4.69% higher at $677.35 on Thursday and were down 1.23% in extended hours.