Tesla Still Struggling With Production, But Skies Are Beginning To Clear

After releasing its worst quarterly figures ever, Tesla said it will delay the full-scale production of its Model 3 to early 2018, from December this year. Now, the company plans to churn out 5,000 Model 3s weekly starting some time in March next year, after announcing a total production of just 260 cars of the affordable model in the third quarter and deliveries of 220. Plans were to produce 1,500 Model S between July and September.

The biggest problem seems to be the new battery that Tesla is developing. This battery should make the Model 3 cost-effective, but progress on it was hampered by problems with subcontractors, the major degree of automation in the gigafactory where the Model 3 is manufactured, and other issues in the third quarter of the year, leading to delays.

Now, however, the skies ahead look brighter, according to Elon Musk, although the Tesla CEO declined to give an estimate of when Model 3 production will reach 10,000 per week – given the uncertainty surrounding what other challenges may crop up along the way.

Meanwhile, Tesla delivered a record number of its other two models during the third quarter, at 25,915 combined, with annual deliveries of the two models seen to hit 100,000, up 30 percent from 2016. In the fourth quarter, however, Tesla will cut production of Model X and Model S, as it continues to direct more resources to Model 3.

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It’s Model 3 that analysts see as the main stumbling block in front of the electric car maker. According to UBS, there are more challenges with it to overcome, and Tesla will continue to burn cash in its attempts to do that. Model 3 is also seen as the culprit behind the larger than expected quarterly loss Tesla reported yesterday, at US$619 million, although revenues were up by an annual 30 percent to US$3 billion.

Yet it’s easy to see the reason for the focus on Model 3: this is the first affordable Tesla, at US$35,000 and it is widely seen as the ultimate guarantee of the company’s future profitability. Given that Tesla is doing some things for the first time in the auto industry, including the degree of automation in the manufacturing process, stumbling blocks are only to be expected.

By Irina Slav for Oilprice.com

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