By on October 3, 2017

tesla-model-3-1-610x407

While the venerable Tesla Model S and X reached more customers than ever before in the last quarter, the hotly anticipated and far cheaper Model 3 stumbled out of the gate.

In a quarterly statement released yesterday, Tesla says just 260 Model 3s made it off the Fremont, California assembly line between the launch of production in late July and the end of September. Of that number, 220 made it to customer driveways. That’s not encouraging news for investors, nor for the model’s roughly half-million reservation holders, some of whom were told at launch not to expect their vehicle until the end of next year.

With the Model 3, expected to be the model that makes or breaks Tesla as an established automaker (while catapulting the electric car to mainstream status), timeliness and quality is key. Going into it, CEO Elon Musk warned his employees of “at least six months of manufacturing hell.”

It sounds like Musk’s prediction came true.

In its statement, Tesla claims the company delivered 26, 125 vehicles in the third-quarter. Of that tally, 14,065 were Model S sedans and 11,865 were Model X utility vehicles — a quarterly production record for both. The Model 3, however, didn’t fare so well. Production of the little sedan didn’t come close to the 1,500 units predicted for September.

“Model 3 production was less than anticipated due to production bottlenecks,” said the automaker. “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.”

In a bid to reassure nervous observers, Tesla made sure to claim the Model 3 is sailing towards calmer waters. Keep in mind the automaker has promised a production rate of 5,000 Model 3s per week by the end of the year.

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

Certainly, some Tesla aficionados have limitless confidence in Musk’s abilities to pull off a miracle, though not everyone lives blissfully on that side of the fence. Some investors have come to expect this of the company.

“Elon’s never made a number, ever,” Ross Gerber, CEO of (Tesla shareholder) Gerber Kawasaki Wealth & Investment Management, told Bloomberg. “Coming up short is what we expect of him.”

Ben Kallo, an analyst at Robert W. Baird & Co., claims the company is three of four weeks behind its production ramp. If Tesla plays catch-up and surpasses its production targets (and barring any quality issues with delivered vehicles), all of this simply becomes forgotten teething pains. Still, the company’s shares sank nearly two percent yesterday, part of a broader cooling-off trend for the stock.

The first orders filled for the Model 3 are pricier Long Range models, which ring in at $44,000 after a federal tax credit. Later builds will satisfy customers who lined up for the base $35,000 car.

[Image: Tesla]

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42 Comments on “Tesla Blames ‘Production Bottlenecks’ for Trickle of Backlogged Model 3s...”


  • avatar
    DeadWeight

    Tesla will be bankrupt within 24 months – max.

    Zealous Tesla fanbois (The Cult of Elon) will now keyboard or thumb-and-finger-stroke-touchscreen assault me for daring to blaspheme their Dear Supreme Leader.

    • 0 avatar
      rev0lver

      The international combustion engine will be dead in 5 years. Instant charging high density batteries are just around the corner. You’re just a dinosaur. Elon walks on water.

      Am I doing this right?

    • 0 avatar
      dukeisduke

      I agree – 36 months, tops. They’ll either go bankrupt or be acquired. It’s not that I don’t like their cars – I know a few people that own them (Model S cars), and I think they build some great cars. It’s just that I think there’s no way in hell that they’re going to be able to build 500,000 Model 3s a year, unless they farm it out to somebody like Valmet Automotive or Magna Steyr.

    • 0 avatar
      28-Cars-Later

      @DW

      Tesla will not be allowed to fail, there are too many juiced in people or institutions involved in the stock bubble. The firm is also spearheading EV acceptance which yesterday struck me as a possible plank in Agenda 21 (the bigger picture). I truly hate to say this but long TSLA.

      • 0 avatar

        I think 28 may be right too many important people with way too much capital are invested in Tesla’s future. I’m more and more thinking “group think” will prevent the fail the numbers show.

      • 0 avatar
        WheelMcCoy

        I agree. People will wait, like waiting for a favorite barber or favorite restaurant.

      • 0 avatar
        derekson

        It will fail whenever the stock bubble starts deflating. It should be able to keep on operating at a loss until that happens though.

        The real issue for them is going to be that the Model S and X will be getting long in the tooth with no replacements in sight yet when superior alternatives come to market from Mercedes, Porsche, Audi, etc.

        Well, that and the fact that the Model 3 is not going to sell at the volumes promised and likely still won’t bring in real profits for the company.

    • 0 avatar
      SCE to AUX

      TSLA has acquired ‘too big to fail’ status.

    • 0 avatar
      Vulpine

      “Tesla will be bankrupt within 24 months – max.”

      People have been saying that since 2008, when the first Roadsters came out.

    • 0 avatar
      zip89123

      Definitely bankrupt. Musk can’t get any more government $$$ to support production. Like MCI & Enron, the end is near.

      • 0 avatar
        VoGhost

        A strange thing happens when people talk about Tesla. They forget that Tesla doesn’t have any special tax breaks or other deals with the government, and is subject to the same tax code as every other automaker. They also forget the GM and FCA took $ billions in handouts less than a decade ago.

        • 0 avatar
          krhodes1

          The difference is that if GM and Chrysler had failed, they would have brought down the entire economy with them. If Tesla fails, they will hurt the feelings of some fanbois. Bit if a difference there.

          • 0 avatar
            VoGhost

            I agree, krhodes – I don’t question the decision to bail out GM and Chrysler.

            I’m just pointing out that you can’t get through a TTAC comments section on Tesla without reading about all the (nonexistent) sweetheart deals Musk got from the Obama administration. But very rarely does a review of a Hellcat mention it would not be possible without taxpayer dollars.

  • avatar
    Cactuar

    “Coming up short is what we expect of him.” fantastic quote.

  • avatar
    APaGttH

    Two-hundred-and-twenty in driveways with a target of 1,500. So that is an 85% miss.

    Just sayin’

    • 0 avatar
      VoGhost

      A balanced article would have noted that while Model 3 was 1,300 units behind expectations, the Model S and Model X were more than 6,000 units ahead of expectations. Which is why TSLA stock is up.

  • avatar
    cognoscenti

    Stock up by 3% today to $344.54. Just shows that this is a “meets expectations” as far as the Street is concerned.

    Question is, do you short Tesla and with what horizon? They seem to just go back to the well as often as they like for a fresh infusion of cash…

  • avatar
    EBFlex

    The only thing Tesla is good at is manufacturing excuses as to why their overrated fashion accessories suck.

    • 0 avatar
      stuki

      Their Big Idea, which has so far worked out splendidly; was that if they could get the egos of the well connected invested in their appearance of success; those well connecteds would rob, debase, ban, regulate, subsidize, go to war, call of wars, murder, imprison, rape and pillage; in order to avoid being shown up to be no more than gullible chumps. IOW; as long as the vanity of the dictatorial classes is on the line; economic reality can be suspended for quite some time indeed.

      • 0 avatar
        indi500fan

        I believe you have analyzed this quite correctly.
        A wise man once told me “never short against a crony capitalist”

      • 0 avatar
        VoGhost

        I think Tesla is just trying to make cars. Well, cars, and batteries and solar roofs. I don’t see anything on their website about murder, imprisonment or rape. Maybe you could share a link.

        Is it possible you’ve confused an entrepreneurial American carmaker with ISIS?

  • avatar
    1998S90

    That’s not a very attractive car.

  • avatar
    Fred

    Things go wrong, it’s Murphy’s Law. There is not an engineer in the world that won’t admit otherwise. Unfortuantly management don’t want to schedule for it.

    • 0 avatar
      WheelMcCoy

      I know the frustration. And I’m annoyed that Musk put his people on a punishing schedule *unnecessarily*. With any high end / high quality product, I’m willing to wait. Engineers, chefs, barbers, under pressure, will cut corners, and sometimes ears. :)

      • 0 avatar
        Fred

        Engineers relunctently cut corners, because the bosses keep yelling at us. Of course they yell at us when the corner fails. Glad I’m retired, no more deadlines.

  • avatar
    SCE to AUX

    Tesla hasn’t even said they know how to solve the problems, which makes me suspect they’ve found a few serious design flaws that will require design changes, tooling changes, and mfg process changes in order to uncork the bottle.

    Completing 3 cars per day means they’re essentially hand-building them right now. The July 28 production reveal was merely a show for investors.

    These bugs also explain why Tesla has required its first buyers to sign an NDA. You’ll notice a dearth of videos from happy customers – because they’re not allowed to directly share this information. Most reports on this ‘production’ car are second-hand, such as one sent to a detailing shop.

    As a Model 3 reservation holder, I’m getting nervous. Tesla needs to appreciate that the 500k people who want this car are not interested in being beta testers.

    • 0 avatar
      JohnTaurus

      “Tesla needs to appreciate that the 500k people who want this car are not interested in being beta testers.”

      They put money down for a car that didn’t actually exist except in their heads and on (digital) paper, and its clearly been Tesla’s policy to build a car first and then fix it later (Model X doors, for example). So, I find that hard to believe that anyone should have expected anything less than exactly that.

      • 0 avatar
        VoGhost

        Perhaps they paid their deposit knowing that electric car drivetrains have 4 moving parts, vs. 133 on average for ICE (and getting more complex every year).

        No doubt there will be teething pains as Tesla ramps up Model 3 production. But is it all that different from what Audi has done with the Q5 – building a new model in a new Mexican factory, skipping the production prototyping phase?

        • 0 avatar
          krhodes1

          “3 moving parts”? So Tesla has somehow managed to make a car that has no hinges, vents, HVAC, controls, bearings, brakes, suspension, etc, otherwise known as all the OTHER moving parts in a car that are also the things that generally break more than the oily bits?

          You fanbois are sooo cuuuuute!

          • 0 avatar
            VoGhost

            Krhodes – I wrote: in the drivetrain.

            All those things you mention I expect to be very similar to competing ICE vehicles, as they use the same suppliers as competitors.

  • avatar
    SCE to AUX

    TSLA stock price is volatile. A 3% move up or down is nothing.

    As for their production ramp, I’ll guess it’s about 2 months behind.

    “…the venerable Tesla Model S and X” Wait, is this TTAC?

  • avatar

    3 cars per day. I could probably build three cars per day. Is this the Bugatti or Rolls Royce assembly line ?

    Also, you sign an NDA to drive a car ? What ? Is this Ferrari ? Ferrari can dangle new cars out there to make you take your Nyan Cat wrap off, but Tesla ?

    • 0 avatar
      PandaBear

      Unlikely 3 cars per day, more like line stopped for 3 weeks then suddenly unblocked.

      Wish they found the problem and have a fix already. I’d not be surprised this is not the last problem to be solved.

    • 0 avatar
      Richard Chen

      Musk would hire you in a heartbeat. NUMMI built 74 cars/employee/year, Tesla is somewhere between 8-14 cars/employee/year. Automotive News article from this past spring:

      http://www.autonews.com/article/20170611/OEM01/170619951/teslas-real-capacity-problem:-too-many-people


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