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Home>Tesla Model 3 hit by 'production bottleneck' that slowed initial deliveries

Tesla Model 3 hit by 'production bottleneck' that slowed initial deliveries

Tesla Model 3 hit by 'production bottleneck' that slowed initial deliveries

10/03/2017

By Jeremy C. Owens, MarketWatch

Stock falls in after-hours trading despite overall beat on quarterly deliveries, thanks to Model S and Model X

Tesla Inc.'s Model 3 rollout didn't start at ludicrous speed.

The electric-car maker said Monday that it produced 260 Model 3 sedans and delivered 220 of the cars in the third quarter, after holding a launch event for the car at the end of July (http://www.marketwatch.com/story/elon-musk-gets-the-35000-tesla-model-3-price-tag-he-wanted-but-extras-cost-more-2017-07-29)that included the delivery of the first few cars to employees. Chief Executive Elon Musk has said (http://www.marketwatch.com/story/teslas-model-3-will-be-launched-with-panache--and-a-party--later-friday-2017-07-28)that he expected Tesla (TSLA) to produce 100 Model 3 cars in August and ramp up to 1,500 in September, with plans to produce 5,000 Model 3 cars a week by the end of the year.

"Model 3 production was less than anticipated due to production bottlenecks," the company said in its announcement Monday. "Although the vast majority of manufacturing subsystems at both our California car plant and our Nevada Gigafactory are able to operate at high rate, a handful have taken longer to activate than expected."

The Model 3 is a critical component of Musk's "master plan" for Tesla (http://www.marketwatch.com/story/elon-musks-master-plan-for-tesla-solar-power-fully-autonomous-car-sharing-and-heavy-vehicles-2016-07-20), as he sees the lower price tag -- the cars start at $35,000, but early orders are only for a more expensive version that can run about $44,000 -- as the key to making electric cars more prevalent and useful. To facilitate the lower price, Tesla's plan is to lower costs by producing lithium batteries at the Gigafactory that will be used in the cars.

Tesla said in early August that it had 455,000 reservations for the Model 3, the first update on demand for the car since it collected 373,000 reservations, with a $1,000 deposit, after first showing it off in 2016. Musk said at that time that "people should absolutely have zero concern" that Tesla will be able to produce 10,000 Model 3 units a week by the end of 2018 as it seeks to meet demand.

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

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