Tesla pushes back Model 3 targets again after production miss

Delia Walker
January 5, 2018

"As we keep on focusing on quality and productivity as opposed to just pushing for the most elevated conceivable volume in the briefest timeframe, we hope to have a marginally more steady incline through Q1, likely closure the quarter at a week by week rate of around 2,500 Model 3 vehicles", Tesla said in a discharge.

A slow start for the Model 3, which had originally been expected to reach a production target of 20,000 per month by December, has begun to hit Tesla´s shares. Tesla shares fell as much as 2.7% after the close of regular trading to $308.80. The new Model 3, crucial to the company's success, won't hit full-scale production until the end of June, Tesla said Wednesday - almost a year after the company began manufacturing the auto in small numbers.

"Tesla has really lofty goals for automation", Tasha Keeney, an analyst at ARK Investment Management, which holds Tesla shares, said in a phone interview. "Issues caught by early customers can be rapidly addressed by Tesla's versatile assembly process".

The previous cross-country record for an electric vehicle was 55 hours, set in a Tesla Model S by Roy and two other men in 2016, according to The Drive. Instead, Tesla said it now plans to reach its goal of 5,000 vehicles per week by the end of the second quarter. Near term, we expect another miss in Model 3 production, but in 2018 we predict production will turn the corner. Prior to the release, the average estimate for Model 3 deliveries was 2,900, according to Bloomberg's survey of nine widely-varied industry forecasts.

Tesla said 860 Model 3s (as well as 2,520 Model S and Model X electric cars) are now in transit to customers; they will be counted in Q1 delivery totals.

Heading into the report, Tesla slightly reduced production of the Model S and Model X "because of the reallocation of some of the manufacturing workforce towards Model 3 production, which also caused inventory to decline", it said.

The company has said more than 400,000 people have put down $1,000 refundable deposits on the Model 3.

Robert W. Baird & Co. analyst Ben Kallo said he sees Tesla having enough cash and additional liquidity sources to cover it through the revised 5,000-a-week schedule, meaning no capital raise will be required in the first half of this year. Looking ahead, Munster believes that Tesla may be able to boost Model 3 production in 2018 to 150,000 units. During the last week of December, the company said, it made 793 Model 3s.

Tesla's announcement came after NY markets' closing time. "They don't have a ton of wiggle room though in our view", Spak said. The company said it was not able to deliver numerous Model 3s it built because of a production spurt that came just before the holiday season.

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