China factory production key as Tesla reports third-quarter results

SHANGHAI: Tesla Inc is conducting trial production runs at its new $2 billion China factory for the past several weeks and will sell some of the first cars from the plant to its employees, sources said.
Whether billionaire Elon Musk’s flagship company can start mass production quickly enough to hit stated targets is the question investors will want an answer to when Tesla announces third-quarter results on Wednesday.
The US electric vehicles maker is under pressure to ramp up output globally, and the Shanghai plant’s production schedule is crucial if it wants to reach its ambitious target of an annualised production rate of 500,000 vehicles by the end of the year.
Tesla last week obtained the certificate it needs to start manufacturing cars in the country. But analysts contend that uncertainties around labour and suppliers make it a challenge to start mass production.
“There is a lot in the equation that is not in their control,” said Tu Le, analyst at China-based research firm Sino Auto Insights.
“There are some things that just need time in order to complete, like qualifying new manufacturing processes, a new battery supplier, getting the tooling shipped and set up, as well as setting up all the suppliers. Any parts that have to be imported need to go through customs, which also could mean delays,” he said.
Tesla is also in the process of obtaining a key certification needed to sell China-made cars in the country, it told local media, though it is unclear when the government will grant it sales clearance.
It said in April it aims to produce at least 1,000 Model 3 cars a week at the new factory by the end of this year.
Analysts, though, are doubtful that Tesla will hit this target, given its patchy production record.
Delays and quality issues have marred the launches of Tesla’s Model S and Model X vehicles in the past, and Tesla struggled to start here making the Model 3 at its California factory in 2017.
The company took six months longer than originally forecast to hit a target of 5,000 Model 3 cars per week, achieving that pace about a year after launching production.
Still, Tesla is taking steps to ensure a smooth launch of production, including trying to diversify its battery supplier base, sources have said. — Reuters