Tesla races to turn a profit amid questions about its ability to deliver cars

Where in the world are Tesla’s cars?
Where in the world are Tesla’s cars?
Image: David Zalubowski / AP Photo
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Tesla may have finally straightened out its critical production bottlenecks. The company met Wall Street expectations producing 80,142 vehicles in the third quarter, about 50% more than its previous high set last quarter, according to the company.

The latest numbers included 53,239 Model 3s, the company’s first mass-produced car, slightly under the 5,000 or so cars Tesla has been producing per week at its peak in an all-out sprint at the end of the quarter. While less than the 6,000 Model 3s per week Tesla said was its target (paywall) in July, an investment analyst from Instinet who toured the company’s Fremont, California, factory on Sept. 25 said Model 3 production was “organized and brisk” in spite of delays from manufacturing stations such as body welding and paint.

Getting the cars to customers, however, has proved challenging. Tesla managed to deliver 83,500 vehicles in the most recent quarter, beating Wall Street analysts’ expectations. The number of Model 3s it delivered (55,840) was also slightly higher than analysts’ consensus of 55,600, according to FactSet.

But Tesla said in a Oct. 2 statement that “delivery and outbound vehicle logistics” were now its main challenges. Around 400,000 customers who deposited $1,000 are still waiting in line for a Model 3. It’s not clear when they will all get their cars. The Model 3 is supposed to start at $35,000, but the cheapest models offered on Tesla’s website are still priced at $49,000. Even among those receiving cars, customers are complaining about long waits and unresponsive service from Tesla. “Sorry for difficulties delivering your Tesla due to high volume!” Musk wrote on Twitter on Sept. 28. “Critical to show that environmentally sustainable is financially sustainable.”

Short sellers, investors betting against Tesla, have been photographing staging areas for Tesla vehicles in California, New Jersey, and Arizona for months, and speculating that demand is not matching up to supply. Tesla has apparently been collecting hundreds of cars at empty lots and industrial sites as they await deliveries or, in some cases, receive service due to quality issues, The New York Times reports (paywall). Manufacturing irregularities plagued Tesla’s initial Model 3 launch when customers complained of ill-fitting body panels and wind noise.  While recent reports show improving quality, vehicles are still showing up in lots with bar-coded stickers or grease pencil markings noting pending repairs such as scratches or dents, according to the Times.

Tesla is now racing to deliver a profitable quarter, as Musk has predicted. In an email sent to employees (and submitted to the US Securities and Exchange Commission), Musk told employees on Sept. 30 that “we are very close to achieving profitability and proving the naysayers wrong, but, to be certain, we must execute really well tomorrow [Sunday],” he wrote. “If we go all out tomorrow, we will achieve epic victory beyond all expectations. Go Tesla!!!”

Even if Tesla can sustain these production bursts, the company’s problems won’t end there. Once Tesla fixes its delivery challenges, servicing all those cars is next. Musk has said he plans to bring its collision repair services in-house with same-day service ”for repaired car to be better than before accident,” Musk tweeted in September.