Tesla's Model 3 Story Is Getting Old

One-third of the quarter’s S3 were made in the last seven days. Bill Pugliano  Getty Images

On the production side, Tesla is facing bottlenecks that have forced CEO Elon Musk to dial back his own mass manufacturing goals. Instead, the firm is now saying it'll be making 2500 Model 3s a week by the end of this quarter, hitting the 5000 mark by the end of Q2. At some later point this year, Tesla said earlier, it should ramp up production to 10,000 Model 3s weekly.

"As we continue to focus on quality and efficiency rather than simply pushing for the highest possible volume in the shortest period of time", read the trading note. After selecting the Model S Sedan with a 100 kWh battery, Tesla's trip planner tells me the 12-hour trip will be broken up by a 20 minute charge in Bourges, a 25 minute pit stop in Clermont-Ferrand, a 40 minute charge in Albaret-Sainte-Marie and then one last 40-minute top-up in Narbonne before hopping over the border to Barcelona.

Analysts have again expressed concern over whether Tesla can secure the gross margins on the cars it is aiming for, whether customers will still want the vehicle, and how slower production rates affect the company's other capital-intensive ambitions.

Estimates for Model 3 deliveries varied wildly, coming in as low as 800 from Colin Rusch of Oppenheimer all the way up to 2,250 from Jeffrey Osborne of Cowen & Co., and about 5,800 from analysts at Evercore. The company has also said that welding processes and final assembly tasks at its auto factory in Fremont, Calif., were moving more slowly than expected.

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In a trading update to investors, Tesla said it made almost 25,000 vehicles - including its highly-acclaimed Model X SUV - but suffered from workforce and inventory issues. As for production, the company says that it achieved a production rate in the last few days of 2017 that translates to "over 1,000 Model 3's per week".

They ended up delivering 15,200 Model S vehicles and 13,120 Model X vehicles. "Ramping up production levels with a flawed product is foolish". Tesla delivered 103,082 cars in 2017, a 36% increase over 2016.

Tesla's first mass-market offering keeps encountering roadblocks.

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