April 24, 2018

Tesla Is Falling behind on Model 3 Production This Year

04 October 2017, 12:30 | Lionel James

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The Tesla batteries can supply power to up to 300,000 homes

The company's quarterly production statement said that "Model 3 production was less than anticipated due to production bottlenecks".

In after-market trading, Tesla shares fell more than 1% to US$337.84.

Glitches in ramping production of the Model 3 are a big worry for investors, if not for Tesla. "We understand what needs to be fixed".

A maverick startup company founder, Elon Musk has been in the habit of making grand promises for what his various outfits - Tesla, SpaceX and Hyperloop among them - can do in the future.

Altogether, Musk predicted that third quarter production numbers for the Model 3 would be around 1,630 vehicles, which means he's off by 84%. At the high end, the Model 3 goes for $59,000.

The Model 3 represents the biggest challenge to date for Tesla, which quickly needs to transition from a small-volume automaker in order to live up to the lofty expectations set for their mass-market electric auto. Both the Models S and X had slower-than-advertised rollout schedules when they first launched.

The figure is also a long way off the 20,000 a month by December that Tesla CEO Elon Musk had indicated back in July.

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This falls short of the initial production target of 1,500 models per week. Deliveries of its other models for this quarter were also on par and are expected to surpass the past two quarters of the year with 14,065 Model S and 11,865 Model X delivered. Musk warned after handing over the keys to the first Model 3 owners in July that it would be "hell" ramping up output of the auto, which racked up nearly half a million reservations as of early August.

Tesla ultimately expects to deliver about 100,000 Model S and X vehicles in 2017.

Tesla clearly thought ahead on the Model 3.

While the miss is early on in Tesla's Model 3 manufacturing growth process, it could be an indicator of struggles to come.

"Continued challenges in executing on the Model 3 ramp would be disastrous for the company given the competition that is expected for 2019 and beyond", Jeffrey Osborne, an analyst at Cowen & Co., wrote in a report to clients.

Tesla struggled to produce its cheapest model shortly after the auto debuted, setting back Chief Executive Officer Elon Musk's mission to reach mainstream consumers.

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