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Tesla’s critical production ramp-up for its entry-level Model 3 sedan appears to be falling further behind, according to a new report that says the company will produce only 5,000 of the vehicles in the fourth quarter.
Meanwhile, another new report suggested that 2018 — and particularly Model 3 production during the coming year — will test the company’s leading position in the electric car world and play a strong role in whether investors keep putting money into the firm.
The Model 3, which at a starting price of $35,000 is intended to bring the Palo Alto electric car company into the mainstream auto market, has been plagued by delays. CEO Elon Musk in November confessed to analysts that the car’s production was some three months behind schedule.
Now, boutique investment bank KeyBanc Capital Markets is predicting fourth-quarter Model 3 production will amount to a paltry one-third of the bank’s earlier prediction of 15,000 vehicles produced in the period, Reuters reported Wednesday.
“The numbers indicate that the electric carmaker may still not be out of its self-described ‘manufacturing hell’ for the production of the … sedan,” according to Reuters.
Tesla did not immediately respond to a request for comment on the accuracy of KeyBanc’s prediction, or provide actual production numbers.
Tesla, whose vehicle models have all seen production delays, has in recent months put even more pressure on itself. It has promised not only to satisfy hundreds of thousands of would-be Model 3 owners, but also to produce a new electric semi truck in 2019 and ultra-fast new Roadster in 2020, along with starting to produce a “Model Y” compact SUV as early as mid-2019 and unveiling a pickup truck as soon as the end of next year.
“In Q3, we delivered the 250,000th Tesla,” Tesla said in its November earnings report. “This is a significant milestone as the Tesla fleet is now about 100 times larger than it was five years ago, just before the launch of Model S.”
Musk, in July, said more than half a million prospective Model 3 owners had put down refundable deposits, and the company would “go through at least six months of manufacturing hell.”
KeyBanc said it talked to people at 18 U.S. Tesla stores, forcing the bank to revise its expected fourth-quarter Model 3 production estimate.
“We talked to stores in California doing as many as a dozen per week with around 10 being the average, and we estimate stores outside of California were doing something closer to half a dozen per week,” KeyBanc said in a note, according to Reuters.
In the third quarter, Tesla had fallen far short of its Model 3 production target, making just 260 instead of a planned 1,500, citing “production bottlenecks.”
In November, Musk admitted that it would likely take three extra months for the firm to start producing 5,000 Model 3s per week. The company would hit that level late in the first quarter, rather than in December, Musk said.
The Model 3 is crucial to Tesla, and 2018 has long been viewed as a make-or-break year for the widely watched company.
“The next 12 months are just hugely critical for the company,” Karl Brauer, executive publisher and analyst for Autotrader and Kelley Blue Book, said back in July. “The Model 3 and several other new electric vehicles could capture the imagination and buzz of U.S. drivers and push EVs into the mainstream, he said. “That’s really what EVs need.”
But Tesla — known for blown deadlines — has to hit certain targets for production and quality to remain at the front of the EV pack, analysts have said for months.
Ugly numbers for Model 3 deliveries could start squeezing off the cash flow for Tesla, Autotrader analyst Michelle Krebs told USA Today, in an article published Wednesday.
“Is this the year investors will say, ‘Enough’s enough,’ or will they continue to fund Tesla?” Krebs said. “That’s the big question. I suspect investors would continue funding them if they see progress on the Model 3.”
