Why Tesla Model 3 Deliveries Missed the Mark

Tesla now expects to achieve a weekly production rate of around 2,500 Model 3 vehicles by the end of the first quarter

Chief financial officer Deepak Ahuja said during an earnings call in November that cash flow will improve significantly once Tesla ramps up Model 3 output because the company will collect money from customers before paying its suppliers.

But it was already hard to see how Tesla can sell the Model 3 at its $35,000 starting price and pull in 25 percent gross margins, which are typical of higher-end luxury cars, Brinkman said.

On the back of these revelations, shares in Tesla fell by 1.7 per cent to $312 in after-market trading.

Model 3 production rate exiting 4Q17 easily 50% above our pace of delivery forecast for 1Q.

Tesla's announcement "isn't much of a surprise" because of the automaker's previously known Model 3 production problems, but if the bottlenecks continue they could cause Tesla serious problems, said Jessica Caldwell, executive director of industry analysis at Edmunds.com. After selecting the Model S Sedan with a 100 kWh battery, Tesla's trip planner tells me the 12-hour trip will be broken up by a 20 minute charge in Bourges, a 25 minute pit stop in Clermont-Ferrand, a 40 minute charge in Albaret-Sainte-Marie and then one last 40-minute top-up in Narbonne before hopping over the border to Barcelona.

However, the delays intensify the rate at which Tesla is burning cash-US$1.1 billion in the third quarter and about the same estimated for the last quarter of 2017-and worrying investors, who have yet to see a profit from Tesla.

Only 1,550 Model 3s were delivered in 2017's fourth quarter, the company said in an online statement Wednesday. "The company has now said it is focused on quality versus volume, which is the right focus". But early versions of the Model 3 suffered battery quality problems, and it's not clear whether those have been sufficiently resolved.

Including Model S sedans and Model X crossovers, Tesla delivered a total of 29,870 vehicles during the fourth quarter. Tesla delivered 103,082 cars in 2017, a 36% increase over 2016.

Slow production could affect the number of Model 3 buyers who receive the $7,500 federal electric vehicle tax credit, and it is unclear whether this may drive away buyers, said Cowen analyst Jeffrey Osborne. But Tesla has skipped many incremental steps used by established carmakers when launching new products.

"Tesla has really lofty goals for automation", Tasha Keeney, an analyst at ARK Investment Management, which holds Tesla shares, said in a phone interview. Tesla said it was its "all-time best quarter" for combined Model S and Model X deliveries.

Related:

  • Arsenal manager Wenger banned for three matches after admitting misconduct charge

    Arsenal manager Wenger banned for three matches after admitting misconduct charge

    A disbelieving Conte beat the turf in frustration, admitting the wasted chances cost third-placed Chelsea as they try to catch runaway leaders Manchester City.

    Apple acquires Vancouver-based Buddybuild to simplify development of iPhone apps

    Now, the acquisition of BuddyBuild could help Apple up the number of downloads, which is still behind Google's Android. Consumers spent $300 million on apps on January 1, the most for a single day since the App Store launched in 2008.
    Death toll in terrorist attack in Kabul rises to 20 people

    Death toll in terrorist attack in Kabul rises to 20 people

    Kabul has been hit hard by terror attacks attributed to Taliban, Islamic State (IS), and other militants operating in the country. ISIS, which is opposed to both the Taliban and the Western-backed government, has claimed a growing share of such attacks.
  • Amazon in talks for Premier League streaming rights

    Amazon in talks for Premier League streaming rights

    Richard Broughton, Research Director at Ampere Analysis, said it is very likely that the company will bid for the EPL rights. But bosses are thought to believe that more top-flight sports will draw in new subscribers to their Prime TV service.
    Moyes happy with Hammers point

    Moyes happy with Hammers point

    One day we might have the players Tottenham have. "This year we already have four points and we have to continue in this way". Tottenham have also ended their interest in Everton midfielder Ross Barkley, who is set to join Chelsea.
    Hard-line scholar says social media fed Iran protests, unrest

    Hard-line scholar says social media fed Iran protests, unrest

    The United States is calling for the United Nations Security Council to hold an emergency session to discuss the Iranian protests. Trump tweets another message to Iran: "Such respect for the people of Iran as they try to take back their corrupt government".
  • Sears closing more stores

    Sears closing more stores

    In the NY area, the Sears located in Hicksville, on Long Island, is expected to close, as well as one in Toms River, New Jersey. Sears Canada filed for bankruptcy previous year , and is in the process of shuttering its business entirely.
    Dana White Goes Off On Showtime Sports In Unhinged Rant

    Dana White Goes Off On Showtime Sports In Unhinged Rant

    And his last fight was in a boxing ring against Floyd Mayweather Jr in August a year ago when he lost in the 10th-round via a TKO. The 29-year-old Irishman fought last inside the octagon in November 2016 against Eddie Alvarez .
    Healthcare adds 31k jobs in December; hospital job growth picks up

    Healthcare adds 31k jobs in December; hospital job growth picks up

    Shortly after the recession, employers and hiring managers could pick and choose employees because unemployment was so high. By region, Quebec and Alberta saw the biggest increases last month with each province adding more than 26,000 new jobs.
  • HP recalls computer batteries due to fire and burn hazards

    HP recalls computer batteries due to fire and burn hazards

    Three of those customers also reported property damage totalling $4,500, and one reported a first degree burn on their hand. HP has issued instructions for using its battery validation tool to check if your laptop is impacted.
    'Pakistan aid freeze not linked to terror attacks on India'

    'Pakistan aid freeze not linked to terror attacks on India'

    In the process, the forces had also captured one of the militants, who is a Haqqani Network operative. Since 2002, Pakistan has received over $13 billion in Coalition Support Funds (CSF) from the US.
    Liverpool Star Mohamed Salah crowned 2017 CAF player of the year

    Liverpool Star Mohamed Salah crowned 2017 CAF player of the year

    The Egypt forward scored the goal that secured his country a place at this year's World Cup, while he has been in superb form since signing for the Reds.

Comments

Other news