Tesla falls way short on Model 3 deliveries, but investors shrug it off for now

Tesla has run into some serious traffic on its way to mass-market Model 3 production.

The Palo Alto company on Monday said it delivered only 220 Model 3s in the third quarter, far short of the about 1,200 to 1,500 deliveries of Tesla’s newest vehicle that the company and analysts had expected by the end of September.

In a filing, the company blamed “production bottlenecks” in the form of manufacturing systems that have “taken longer than expected to activate.” But Tesla said it understood what needs to be fixed and was confident it would be able to do so shortly.

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The Model 3, which starts at $35,000, is the electric car company’s cheapest model yet — about half the price of the Model S. About 455,000 eager buyers have plunked down $1,000 deposits for the Model 3 since its introduction last year and are waiting for delivery.

The reported production bottleneck of what is seen as Tesla’s entry into the mass EV market prompted Goldman analyst David Tamberrino to reaffirm his sell rating on Tesla shares. He predicted that the company’s shares would fall about 40 percent in six months, to $210.

“We continue to maintain our more cautious Model 3 ramp, which is far below company targets,” he said in a note to investors Tuesday.

The report of a production bottleneck comes as CEO Elon Musk warned that a significant manufacturing ramp-up would be “hell,” and as Tesla worker conditions are in the spotlight.

Tesla has not returned a request for comment.

Analysts see Model 3 production as key for Tesla. In a report released in August, Moody’s said the company needs a fast ramp-up of the sedan: “Tesla’s aggressive production plans will be essential to solidifying its position in the face of rising competition.”

The competition is definitely rising as automakers go all in on electric. Monday, General Motors said it planned to introduce 20 new all-electric models by 2020, becoming the latest car company to publicly announce ambitious EV goals. Bloomberg estimates that almost 50 new electric vehicles will roll out between now and 2022.

But despite its issues in rolling out the Model 3, Tesla also reported what it said was the best quarter ever for deliveries of its other vehicles: a 4.5 percent year-over-year increase in third-quarter deliveries of the Model S and X. The company delivered 26,150 vehicles in all: 14,065 of its Model S sedan, 11,865 of its Model X crossover SUV and the 220 Model 3s. In addition, Tesla raised its delivery target for the Model S and X this year, to 100,000, which it noted would be a 31 percent increase from last year.

Tesla shares fell sharply in early trading Tuesday but are now up about 1 percent to $344.85.


Photo: Tesla unveils the new Model 3 sedan at the company’s design studio in Hawthorne, California, on March 31, 2016. (Justin Pritchard/Associated Press) 


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  • lnon

    Has Elon ever met a revenue or production goal he set for his company? Can his company or his product exist without significant tax incentives and bail-outs? Look what happened in Hong Kong when the government pulled the tax subsidies from his car; sales went to ZERO the next quarter. He built 250 or so model 3s this quarter and he is saying he will build 100,000 next year? In which universe? This is turning out to be a bit of a joke…

  • omegatalon

    Investors should be afraid.. very AFRAID because the world they know is changing by leaps and bounds as General Motors announced yesterday that they plan to introduce 20 Electric or Fuel Cell vehicles by 2025 and GM won’t be the only one as Volvo, Mercedes Benz and BMW have all said the same thing which means failure to meet production goals will be customers Tesla might not be able to lure back because in 7 short years everyone will be either electric or fuel cell.