Tesla falls short on Model 3 production target — but shares are going up anyway
Tesla Inc. sees progress ahead for the mass-market sedan that keeps falling short of targets and said a capital raise won’t be required this year, spurring a partial rebound for the electric-car maker’s battered shares.
The company led by Elon Musk built 2,020 Model 3 cars in the last seven days, trailing its target for a 2,500-unit rate for the final week of March. Tesla delivered 8,180 of the sedans in the first three months of the year, missing analysts’ average estimate for about 8,800 units in a Bloomberg News survey.
Despite the shortfall, Musk promised a speedy acceleration in the next three months. Tesla shares opened up as much as 6.9 per cent and gained 2.2 per cent to US$258.11 as of 9:47 a.m., regaining some ground after a 22 per cent slump in March.
The lower-than-expected deliveries and production will intensify the debate over Musk’s ability to deliver on his quest to bring electric cars to the masses. Mounting liquidity pressures and challenges with the Model 3 prompted Moody’s Investors Service last week to cut the carmaker’s credit rating further into junk status, adding fuel to a selloff of the company’s bonds to all-time lows.
Addressing ‘Bottlenecks’
“We were able to double the weekly Model 3 production rate during the quarter by rapidly addressing production and supply chain bottlenecks, including several short factory shutdowns to upgrade equipment,” Tesla said in a statement.
The company expects the Model 3 production rate will increase “rapidly” through the second quarter and said it will make 5,000 units a week in “about three months.”
“Tesla does not require an equity or debt raise this year, apart from standard credit lines,” the company said.
Read more: Musk Needs to Recharge Tesla’s Finances to Make the Model 3 Go
Negative Headlines
Beyond the downgrade and the Model 3 concerns, Tesla is also grappling with a U.S. investigation of a fatal crash involving a Model X and a voluntary recall of every Model S made before April 2016. Tesla’s stock fell by 22 per cent in March, the steepest monthly drop since December 2010, the year the company went public.
Heading into the final week of the quarter, a Tesla executive urged line workers at the company’s sole auto-assembly plant in Fremont, California, to safely ramp up Model 3 output to more than 300 a day and “prove a bunch of haters wrong.” Musk said on Twitter Monday he was sleeping at the factory and called the car business “hell.”
The carmaker halted Model S and Model X production at the very tail of the month because it was ahead of schedule to hit first quarter targets. A small number of those workers were invited to voluntarily help build Model 3 cars instead.