Tesla’s ramp-up of production for the entry-level Model 3 sedan may be going more slowly than expected.
The company will produce only 5,000 of the vehicles in the fourth quarter, according to a new projection.
Meanwhile, another new report suggested that 2018 — and particularly Model 3 production during the coming year — will test the company’s leading position in the electric car world and play a strong role in whether investors keep putting money into the firm.
The Model 3, which at a starting price of $35,000 is intended to bring the Palo Alto electric car company into the mainstream auto market, has been plagued by delay. CEO Elon Musk in November confessed to analysts that the car’s production was some three months behind schedule.
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Now, boutique investment bank KeyBanc Capital Markets is predicting fourth-quarter Model 3 production will amount to a paltry one-third of the bank’s earlier prediction of 15,000 vehicles produced in the period, Reuters reported Dec. 27.
“The numbers indicate that the electric carmaker may still not be out of its self-described ‘manufacturing hell’ for the production of the … sedan,” according to Reuters.
Tesla did not immediately respond to a request for comment on the accuracy of KeyBanc’s prediction, or provide actual production numbers.
Musk, in July, had said more than half a million would-be Model 3 owners had made reservations, and the company would “go through at least six months of manufacturing hell,” Reuters reported at the time.
KeyBanc said it talked to people at 18 U.S. Tesla stores, forcing the bank to revise its expected fourth-quarter Model 3 production estimate.
“We talked to stores in California doing as many as a dozen per week with around 10 being the average, and we estimate stores outside of California were doing something closer to half a dozen per week,” KeyBanc said in a note, according to Reuters.
Tesla, which has suffered delays in production of every model so far, had fallen far short of its third-quarter Model 3 production target, making just 260 instead of a planned 1,500, citing “production bottlenecks.”
In November, Musk admitted that it would take a likely three extra months for the firm to start producing 5,000 Model 3s per week. The company would hit that level late in the first quarter, rather than in December, Musk said.
The Model 3 is crucial to Tesla, and 2018 may be a “make-or-break” year for the company, USA Today suggested Dec. 27.
“Speeding the rollout of the mass-market Model 3 is essential to Tesla’s financial health after the company lost several million dollars per day in the third quarter in its rush to begin manufacturing,” according to the newspaper.
Ugly numbers for Model 3 deliveries could start squeezing off the cash flow for Tesla, Autotrader analyst Michelle Krebs told USA Today.
“Is this the year investors will say, ‘Enough’s enough,’ or will they continue to fund Tesla?” Krebs said. “That’s the big question. I suspect investors would continue funding them if they see progress on the Model 3.”
Photo: Tesla CEO Elon Musk in 2015 (AP Photo/Marcio Jose Sanchez, File)
Tags: delay, electric, elon musk, entry-level, KeyBanc, Model 3, sedan, tesla