Jan 3, 2018

Tesla reports jump in electric Model 3 production

Ben Geman, author of Generate

New data: Tesla produced 2,425 of its mainstream-priced Model 3 sedans in the fourth quarter of 2017 and delivered 1,550 of the vehicles, the company said today. Wall Street was unimpressed, sending down Tesla shares by 2% in after-hours trading.

The jump in output follows a disappointing third quarter for the much-heralded car unveiled last year. Tesla produced just 260 in Q3, badly missing its goal of 1,500.

  • "During Q4, we made major progress addressing Model 3 production bottlenecks, with our production rate increasing significantly towards the end of the quarter," the company said in its latest quarterly update for the production and delivery of its various vehicles released Wednesday afternoon.

Why it matters: Tesla's ability to address what CEO Elon Musk has called "production hell" and churn out the Model 3 at scale is vital for the company's future in the increasingly competitive EV market. But the drop in its share price suggests that the market cannot forget that Musk had originally promised to deliver 5,000 Model 3s a week by the end of 2017.

The Silicon Valley company, which garners prolific interest in tech and auto circles but is not yet profitable, has invested heavily in the vehicle and related battery production.

The Model 3 is also important for the wider growth of EV deployment, because Tesla is a major player.

What's next: "As we continue to focus on quality and efficiency rather than simply pushing for the highest possible volume in the shortest period of time, we expect to have a slightly more gradual ramp through Q1, likely ending the quarter at a weekly rate of about 2,500 Model 3 vehicles. We intend to achieve the 5,000 per week milestone by the end of Q2," the company said.

The company has been forced to push back its production targets, and now expects to reach the 5,000-per-week level by the end of the second quarter.

Quick take: The quarterly announcement was exceedingly earnest and humble in tone. Musk seems to understand that he over-promised and that he needs to be ultra-cautious in what he says now. Look for the share price to recover over the quarter, if not the coming week.

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