SPEED BUMP

Tesla’s Model 3 misses production targets a second time

Less than meets the eye.
Less than meets the eye.
Image: Alexandria Sage/Reuters
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Tesla isn’t making as many Model 3s as it planned–again. On Dec. 3, Tesla announced it had only delivered 1,550 vehicles during the fourth quarter of 2017. That’s far less than hoped. The average prediction among analysts surveyed by Bloomberg News this week was 2,917 deliveries. It comes after a disappointing third quarter last year when only 222 Model 3s were delivered (Tesla was predicting 1,500).

The annual numbers landed with a thud on Wall Street, which has watched anxiously as Tesla’s assembly lines have sputtered from technical glitches. The stock slid 1.7% in after-hours trading on Wednesday.

Musk has often described an “S-curve” for Tesla’s production plan in which small batches of vehicles lead to rapid expansion of volume and then level off, a trajectory followed by the Model S and Model X. Delays were expected, but the Model 3 must increase production on a unprecedented scale with little room for error. The highly automated assembly line for the Model 3 means any technical problems slow assembly dramatically. And there have been problems.

In a November letter to investors (pdf), Tesla CEO Elon Musk blamed “production bottlenecks” due to malfunctioning battery module assembly equipment in its Gigafactory 1 outside Reno, Nevada. Tesla redesigned two parts of the battery assembly process, while assigning some of the blame to “manufacturing systems suppliers.”

But that’s good news for Tesla’s electric vehicle competitors. Chevy’s Bolt is surging ahead. GM launched the car in 2015, far ahead of the $35,000 Model 3, Tesla’s first mass-market vehicle, and it seemed like no contest at the time. Tesla had amassed an impressive 400,000-person or so waiting list, and no one was lining up to buy GM’s comparatively dowdy car months before it rolled off assembly lines. Today, monthly sales keep climbing, and it has reported 22,662 in sales since its debut in Dec. 2016.

GM is now on track to sell more than 5,000 Bolts per month by Feb. 2018, assuming today’s growth continues. By contrast, Tesla says it now will only produce 5,000 Model 3s per week by about June 2018 (two quarters later than initially predicted) and 10,000 units per week sometime after that.

Even that figure is in jeopardy. Critics point out that the company’s unprecedented rush to ramp up production puts it at risk of delays and costly recalls if quality issues arise.

The company has never produced more than 100,000 cars in a single 12-month period. But Tesla has skipped many incremental steps used by established carmakers when launching new products. Eventually, Tesla claims, its factories robots will assemble cars faster than the human eye can track. For now, however, Model 3s production is still stuck in first gear.