Published: Fri, January 05, 2018
Hi-Tech | By Wayne Curry

Missing Delivery Estimates by Half, Tesla Model 3 Has an Uncertain Fate

Missing Delivery Estimates by Half, Tesla Model 3 Has an Uncertain Fate

Tesla's $35,000 Model 3 sedan - the company's bid for mass-market scale - is having a slow start off the production line, but one just set a record for an electric vehicle driving across the USA, according to a new report.

Tesla shares fell 2.1 percent in after-hours trading to $310.50 as of 6:07 pm ET.

Tesla's future is tied closely to the promise of the Model 3, a no-frills sedan that's roughly half the cost of a low-end luxury Model S and Model X. Musk has said that his Model 3 is meant to be an electric vehicle for the budget-conscious, and its development would be subsidized by the glitzier older models.

Tesla said it conveyed 29,870 vehicles in the final quarter of 2017, including 1,550 of its expected Model 3 auto.

Early Model S had a lot of issues with inconsistent panel gaps, but as Tesla Inc (NASDAQ:TSLA) built more and more of them, this problem has been disappearing.

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. In the quarter ending December 31, Tesla produced 2,425 units of Model 3 and delivered 1,550.

Tesla had originally expected to be making 5,000 Model 3s/week by the end of Q4.

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The latest production and delivery numbers released by Tesla fall well short of already reduced forecasts.

Tesla also said it had delivered 15,200 Model S and 13,120 Model X luxury cars in the fourth quarter, a 9% increase over third-quarter deliveries. The projection for the current quarter is that it will produce around 2,500 a week, and be producing 5,000 a week by the end of Q2. Musk has long said that production of new Tesla cars occurs like an "S-curve", where initial manufacturing is low and slow; when an inflection point is reached, the production speeds up dramatically.

Tesla said 860 Model 3s (as well as 2,520 Model S and Model X electric cars) are now in transit to customers; they will be counted in Q1 delivery totals. It manufactured 793 Model 3's in the last seven working days of the quarter. Cowen's Osborne wrote in a report to clients Wednesday that the carmaker may need to raise more capital again in the next three to six months.

The company is preparing to have a slightly more gradual ramp in January-March 2018. The Model 3 must be right in terms of quality.

For the entire past year, the shares of the NASDAQ-listed electric auto maker rose 45.70% following a 10.97% slump in 2016.

In the fourth quarter, Tesla shipped a total of 29,870 cars and made 24,565 cars across all models. Tesla's figures were highly better than in 2016, they managed to increase the overall deliveries by 27% for both of the Models.

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