Tesla can't ramp up Model 3 production until 2018

08 November, 2017, 01:13 | Author: Valerie Burke

Musk spoke in depth about the problem with analysts on Wednesday after Tesla posted third-quarter losses that widely missed analyst expectations.

"We're doing this call from the Gigafactory bc that's where the production constraint is for the Model 3", Musk said.

Tesla stock dropped more than 5% after hours as Musk explained what had gone wrong in the making of the new Model 3, the company's first affordably priced electric car.

Musk told analysts a subcontractor for the Gigafactory "really dropped the ball", forcing engineers to rewrite software in four weeks. Tesla is betting its first mass-market car will elevate it to become the first automaker to join America's famous "Big 3" in more than 50 years.

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Tesla's ability to ramp up production of the Model 3, is of particular concern to investors. Today, the company said it delivered 26,137 cars during the third quarter, but only 222 of those were Model 3s. The company had expected to produce about 1,500 during the period.

Investors had sensed something was awry a month earlier, when Tesla said it had only made 260 of the Model 3 last quarter, well below the nearly 2,000 it had forecasted; some reports said the bottleneck was due to the carmaker assembling the vehicle by hand.

Tesla officially announced earnings for Q3 2017 this afternoon, and with early delays in Model 3 production, all eyes were on the production lines, supply chains, and other aspects of the "production hell" that Tesla continues to work through. Now in Q3, the company's financial statement reflects more of that drama, good and bad. Overall, the company hopes Model S and Model X deliveries will reach about 100,000 for the year. "But it's also intensely automated, which lets us realize the margin and cost benefit, but that automation is a lot harder to bring on line". Whether its just Elon's shoot for the stars mentality or the reality, Tesla shared that it believes it will be able to improve the line to the point that it will "ultimately be capable of production rates significantly greater than the original specification". Also this: The company spent $1.1 billion on capital expenditures this quarter and expects do roughly the same next quarter. Tesla notes that it intervened in the process and took over the critical manufacturing process, bringing it in-house from the vendor that developed the process. "A journalist who wrote stories like this should be ashamed of themselves for lacking journalistic integrity", Musk said, noting that "only 2 percent of people didn't make the grade". The researchers used artificial intelligence to teach their system the preferences of each voter, then aggregated them, creating a "distribution of societal preferences", in effect the rules of ethnical behavior in a car. These lines include battery pack assembly, body shop welding, and final vehicle assembly.

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