Tesla continues to struggle with Model 3 production; Posts biggest-ever quarterly loss

Tesla says that it plans to produce about 10% fewer Model S and Model X in Q4 compared to Q3 because of the reallocation of some of the manufacturing workforce towards Tesla Model 3 production.

By: | Published: November 2, 2017 8:58 AM

American electric car manufacturer Tesla Inc on Wednesday reported its biggest-ever quarterly loss as the company has spent more to increase the production of Tesla Model 3 sedan. Elon Musk is still struggling to overcome production issues but still considers the Model 3 as key to the company's long-term profitability. During the third quarter (July-September 2017), Tesla delivered the 250,000 unit. This is a significant milestone for the company as its fleet is now about 100 times larger than it was five years go before the launch of Tesla Model S.

In Q3, Tesla delivered 25,915 units of its Model S and Model X vehicles combined and 222 Model 3 vehicles, for a total of 26,137 deliveries. Combined Model S and Model X deliveries in Q3 grew 18% globally compared to Q2 and 4.5% versus the same quarter one year ago.  In addition, the company's used vehicle sales more than doubled from the prior quarter.

Tesla posted a net loss of $619.4 million, or $3.70 per share, for the third quarter ended Sept. 30 compared to a profit of $21.9 million, or 14 cents per share, a year earlier. Revenue rose to $2.98 billion from $2.30 billion.

Production goal for Tesla Model 3 during the third quarter was missed by a huge margin as its manufactured  only 260 vehicles compared with an earlier target of 1,500, and Musk said last month the car was “deep in production hell”.

Addressing the production issues related to Tesla Model 3, the company further added that  "The initial phase of manufacturing any new vehicle is always challenging, and the Model 3 production ramp is no exception – particularly given our focus on highly automated manufacturing processes that will ultimately result in higher volumes at significantly lower costs. Model 3 has been designed for manufacturability, so the car itself is not difficult to build. That said, the Model 3 production process will be vastly more automated than the production process of Model S, Model X or almost any other car on the market today, and bringing this level of automation online is simply challenging in the early stages of the ramp. We continue to make progress resolving early bottlenecks related to these issues, and there remain no fundamental problems with our supply chain or any of our production processes."

Based on the recent acceleration in order growth, Tesla expect that Model S and Model X are on pace for about 100,000 deliveries in 2017, an increase of 30% compared to 2016. Notwithstanding these increased deliveries, Tesla says that it plans to produce about 10% fewer Model S and Model X in Q4 compared to Q3 because of the reallocation of some of the manufacturing workforce towards Tesla Model 3 production. As a result, inventory level of built Tesla Model S and X vehicles should continue to decline.

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