Tesla Model 3 production falls short of targets in Q3

By DEE-ANN DURBIN Features Associated Press

Tesla Inc. missed its third-quarter production goals for its new Model 3 sedan, leaving customers and analysts to wonder if the company will meet future targets for the hotly anticipated electric car.

Continue Reading Below

Tesla said it delivered 220 Model 3 cars in the quarter. It has produced a total of 260 Model 3s at its Fremont, California, factory since production began in early July.

At that time, Tesla CEO Elon Musk tweeted that the company should be making 100 Model 3s in August and "above 1,500" in September. He also said the company would likely be making 20,000 Model 3s per month by December.

But Musk also warned, in late July, that Tesla would go through "at least six months of manufacturing hell" as it ramped up production of the Model 3. He said there is always a risk of machines breaking down or suppliers not coming through with parts.

On Monday, Tesla blamed "production bottlenecks" for the slow rollout. But it said it was confident it could fix those issues.

"It is important to emphasize that there are no fundamental issues with the Model 3 production or supply chain," the company said in a statement. "We understand what needs to be fixed and we are confident of addressing the manufacturing bottleneck issues in the near-term."

Continue Reading Below

More than 500,000 people are on a waiting list to get a Model 3. The car, which is half the price of Tesla's previous models, is critical for the company's goal of moving from a niche manufacturer of luxury cars to a mainstream automaker.

Akshay Anand, an analyst at Kelley Blue Book, said vehicle production is one of the most complex tasks a company can undertake, and he noted that Tesla had slow production ramp-ups for its previous vehicles, the Model S sedan and Model X SUV.

"This is just one quarter, but if production misses continue into the fourth quarter and even beyond, Tesla will be in a much more precarious position since their future largely relies on the Model 3 being a success," Anand said.

Despite its issues with the Model 3, Tesla said it delivered a record number of vehicles in the third quarter. The Palo Alto, California-based company delivered 26,150 vehicles in the July-September period, up 4.5 percent from the same quarter a year ago. A little over half of those were Model S sedans; the rest were Model X SUVs and the handful of Model 3s.

Tesla said it expects to deliver about 100,000 Model S and X vehicles in 2017, which would be a 31 percent increase over 2016.

Tesla's shares fell 1 percent to $336.79 in after-hours trading.