Tesla is really sensitive about its Model 3 delays

The future of Tesla depends largely on the Model 3: Elon Musk’s bet that Tesla can make a cheaper, mass-produced version of the luxury vehicles that made the company a household name.
January 26, 2018, 7:30pm

The future of Tesla depends largely on the Model 3, Elon Musk’s bet on a cheaper, mass-produced version of the luxury vehicles that made the company a household name.

Which probably explains why Tesla has come out swinging against allegations published in a Thursday CNBC story that Model 3 deliveries will likely miss previously stated goals for at least the third time since November.

The cause for the latest alleged delay stems from battery safety issues and struggles with battery production at the company’s Nevada Gigafactory facility that are “worse than the company has acknowledged,” according to CNBC's source.

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The report in question explains that the delays come from Tesla employees' still assembling batteries partly by hand — a problem reported by the Wall Street Journal in early October. Additionally, Tesla has had to “borrow” employees from a supplier to boost the pace of production.

A company spokesperson dismissed the CNBC story, calling it “an extremely misinformed and misleading article” in a statement to VICE News, and noted that Tesla executives discussed the manual battery assembly in a November earnings call.

“To be absolutely clear, we are on track with the previous projections for achieving increased Model 3 production rates that we provided earlier this month,” the statement said. The Model 3 sedan, which starts at $35,000, is by far Tesla’s cheapest car and has been positioned as the linchpin product of its fleet.

Tesla has reason to be on the defensive. More than 400,000 people have paid $1,000 refundable reservations for a Model 3, but the company’s repeated delivery delays — what the company is calling “production bottlenecks” — are beginning to cause concern among investors.

Tesla delivered 220 of its 1,600 promised Model 3s in the third quarter of 2017, and founder Musk has already walked back his promise that 5,000 Model 3s would be produced per week by the end of March, instead expecting Tesla to hit that mark by June. Some shareholders, irked by the third quarter delays, filed a lawsuit against the company in October over the third quarter delays.

A number of investors have argued that Tesla can’t keep up with the demand for its cars, particularly the Model 3, and that Tesla’s sky-high stock price (currently $340 a share, valuing the company at $57 billion) will eventually crash back to Earth. As for Musk, he and Tesla are urging investors and Tesla buyers to stand pat.

“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 a Jan. 3 press release.

Cover image: A Tesla Model 3 is seen in a showroom in Los Angeles, January 12, 2018. (REUTERS/Lucy Nicholson)