Tesla Misses Model 3 Production Goal Over 'Bottleneck'

04 October, 2017, 00:28 | Author: Franklin Nunez
  • Tesla Model 3 Production Is 84% Lower Than What Elon Musk Promised

As an investor, you either relish the challenge or peer over the edge with a smidgen of trepidation.

Let me first start with the good news.

The electric vehicle maker started taking reservations for its mass-market sedan in March 2016, which is priced at US$35,000 (RM148,000) to start and is key to the company's plans to expand market share. Both the Model S and Model X have followed similar trajectories. The company now expects to deliver about 100,000 Model S and X vehicles in 2017, up 31% compared to deliveries in 2016.

The low number of Model 3s in Q3 suggest that the production process has not gone quite so smoothly, an issue that Musk will no doubt have to address in the next investor meeting.

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Yet the bad news overshadows all this.

"We believe Q3 will be the most challenging part of the Model 3 production ramp", he wrote.

But the company's delivery-to-customers performance over the last four quarters has barely moved: down 25; up 30; down 33 and up 45.

The automaker built only 260 Model 3s during the quarter ended in September, less than a fifth of its 1,500-unit forecast.

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Tesla delivered 14,065 Model S and 11,865 Model X units.

As it is, the average for the past two months is about 26 per week.

Musk has previously talked of Tesla production goals as being aspirational, and noting that even simple things, such as a delay in parts delivery, can have outsize consequences on production.

It says "production bottlenecks" are the reason behind it's less than anticipated delivery of its cheapest electric vehicle, but emphasised there would be "no fundamental issues with the Model 3 production or supply chain". The company understands what needs to be done and that they are confident of addressing the bottleneck of production issues in nearest term. Tesla has disrupted the global auto industry with its stylish electric cars, but it now faces growing competition from the likes of Daimler AG, Volkswagen AG and General Motors Co. Tesla's high-priced crossover, the Model X, went into production in late 2015, long after originally promised and had a slower-than-expected roll out. Nor do they justify a current valuation multiple of 29 times 2018 Ebitda.

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Tesla's Model 3 miss amounts to a one-month lag in production and is not that concerning, Morgan Stanley analyst Adam Jonas said in a report.

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