SAN FRANCISCO: Tesla Inc pushed back its target for volume production on its new Model 3 sedan by about three months, saying it was difficult to predict how long it would take to fix all production bottlenecks. The company also reported its biggest quarterly loss ever, sending shares down nearly 5 per cent after hours as the loss was bigger than analysts had expected.
Tesla, led by Silicon Valley entrepreneur Elon Musk, faces a crucial test in its growth strategy as it ramps up production of the Model 3, its new sedan that starts at $35,000, about half the price of its flagship Model S.
Although Tesla has made inroads among luxury car buyers with the advanced technology and innovative design in its Model S sedan and Model X SUV, it is the Model 3 on which its long-term viability rests. The company continues to burn through cash, and spent $1.1 billion in capital expenditures in the third quarter.
The company said it now expects to build 5,000 Model 3s per week by late in the first quarter of 2018 from its original target date of December.
Tesla said the main constraint was its battery module assembly line at its Nevada Gigafactory, where the company had to redesign part of the production process.
“I was really depressed about three or four weeks ago,” Musk said, adding that he is now optimistic because it is clear what needs to be done. “We are on it, we’ve got it covered,” but it will take a few months longer than expected, he said.
The Palo Alto, California-based company made just 260 Model 3 sedans in the third quarter due to what it called “production bottlenecks.” It had planned to build more than 1,500.
Model 3 production delays mean postponed sales could exacerbate the company’s cash burn. The problems could also worry the over 500,000 customers who have put down a refundable deposit on the car.
Adding to the pressure is the fact that US tax credits for Tesla buyers, intended to help manufacturers ramp up electric vehicles, begin to expire after the company sells its 200,000th vehicle in the United States. The company has not said when that will be, but it has sold 250,000 globally.
Shares of Tesla have fallen nearly 17 per cent from a 12-month high of $385 in September, but are still up 50 per cent from January fuelled by belief in the long-term prospects of the company.
Tesla’s soaring stock has made the company the second-most valuable US automaker behind General Motors Co, which had annual net profit of $9.4 billion in 2016.
Tesla could face major new requirements for cash given Model 3 problems, a possible factory in China, and plans to develop other vehicles, including an electric heavy duty truck. — Reuters
Oman Observer is now on the WhatsApp channel. Click here
