Sci-tech

Tesla Blames Gigafactory Problems For Model 3 Delay

Tesla Blames Gigafactory Problems For Model 3 Delay

Capital World Investors increased its position in Tesla by 0.6% during the 2nd quarter.

Musk tried to put a positive spin on the future by looking back at the past.

Tesla delivered 26,137 vehicles in the third quarter of 2017. He expects margins to expand next year.

Model 3 reservation holders were previously given rough 3-month windows for their delivery based on several factors, like date of the reservation, market where the auto will be delivered, the configuration of the car's powertrain, and whether or not the reservation holder is already a Tesla owner.

After months of trouble-shooting, "We understand these bottlenecks", but things have so far improved only slightly.

Tesla shares dropped five percent after the announcement of the earnings news - while Tesla has yet to make a consistent profit, these losses were particularly large and unexpected.

"If you talked to me three weeks ago, I would have been quite pessimistic", Musk admitted to investors Wednesday.

That's more troubling than it might seem.

Meanwhile, analysts cited by Fortune estimate that the profitability of the Model 3 is heavily dependent on producing 10,000 units per week, but Musk recently declined to offer a timeline for achieving this level of output.

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For example, this one is from a reservation holder who previously had the earliest possible window of "Oct 2017 to Jan 2018" available for the "first production" vehicles. The combined complexity of module design and its automated manufacturing process has taken this line longer to ramp than expected.

"While we continue to make significant progress each week in fixing Model 3 bottlenecks, the nature of manufacturing challenges during a ramp such as this makes it hard to predict exactly how long it will take for all bottlenecks to be cleared or when new ones will appear", the company said in a letter to investors. Without that the carmaker won't be able to come close to the 500,000 annual production target.

In mid-October, The Wall Street Journal reported that Tesla had reached a deal to open a factory in Shanghai's Free Trade Zone. Some observers believe the Chevy model has been picking up customers who have begun writing off Tesla.

Daniel Sparks owns shares of Tesla.

"We left the call frustrated with the lack of transparency from Tesla management", Jeffrey Osborne, a Cowen & Co. analyst who recommends selling the shares, wrote in a note to clients. "Elon Musk needs to stop over promising and under delivering".

Just three months ago, Tesla said it would make 10,000 Model 3 cars per week in 2018.

Some analysts were encouraged by the detail Tesla provided about the battery and production issues and expressed confidence in its ability to fix the problems.

"If such production is not accompanied by an increase in cash consumption, we believe the stock will trade materially higher than it does today", Jonas said while cautioning that forecasting Tesla's ability to hit this goal is extremely hard.


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