Tesla Blames 'Production Bottlenecks' for Trickle of Backlogged Model 3s

Steph Willems
by Steph Willems

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]

Steph Willems
Steph Willems

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  • SCE to AUX SCE to AUX on Oct 03, 2017

    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?

  • Speedlaw Speedlaw on Oct 03, 2017

    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 ?

  • Mike Some Evs are hitting their 3 year lease residual values in 6 months.
  • Tassos Jong-iL I am just here for the beer! (did I say it right?)
  • El scotto Tim, to be tactful I think a great many of us would like a transcript of TTAC's podcast. 90 minutes is just too long for most of us to listen. -evil El Scotto kicking in- The blog at best provides amusement, 90 minutes is just too much. Way too much.
  • TooManyCars VoGhost; I was referring more to the Canadian context, but the same graft is occurring in the US of A and Europe. Political affiliation appears to be irrelevant.
  • The Oracle Going to see a lot of corporations migrating out of Delaware as the state of incorporation. Musk sets trends, he doesn’t follow them.