Tesla Inc (TSLA) Slashes Production of Two Cars, Misses Q3 Estimates

Posted November 02, 2017

"The Model 3 production process will be vastly more automated than the production process of Model S, Model X or nearly any other auto on the market today, and bringing this level of automation online is simply challenging in the early stages of the ramp", Tesla said.

Tesla Inc on Wednesday pushed back its target for volume production on its new Model 3 sedan by about three months, saying that while progress fixing bottlenecks was made, it was hard to predict how long it would take for all production issues to be fixed. But investors' eyes were on the Model 3, the $35,000 vehicle that's meant to move Tesla from a luxury niche automaker into the mainstream.

"We continue to make progress resolving early bottlenecks related to these issues, and there remain no fundamental problems with our supply chain or any of our production processes", Tesla said in a letter issued to shareholders on Wednesday afternoon.

Model 3 production delays mean postponed sales could exacerbate the company's cash burn, which Tesla estimated at $1 billion in the upcoming quarter.

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Tesla on Wednesday reported the largest quarterly loss in its history, and said it was cutting production on two of its vehicle models. The problems could also worry the over 500,000 customers who have put down a refundable deposit on the auto.

"Tesla is learning what traditional automakers have long known — mass vehicle assembly is complicated and expensive", said Michelle Krebs, a senior analyst at Autotrader.com. They have risen 45 percent since the start of this year.

Tesla's soaring stock has made the company the second-most valuable USA automaker behind General Motors Co (GM.N), which had annual net profit of $9.4 billion in 2016.

Tesla previously said it would make 1,500 Model 3's during the last quarter, but the firm dramatically undershot that goal.

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Tesla could face major new requirements for cash given Model 3 problems, a possible factory in China, and plans to develop other vehicles, including an electric heavy duty truck. The company says it will produce 10 percent fewer Model S and X vehicles to reallocate resources to the Model 3. Tesla said installations for its energy storage business more than doubled from a year ago.

Shares of Tesla (TSLA) traded down 2.6116% during mid-day trading on Tuesday, hitting $322.8718.

Revenue was a stronger point for the automotive company, coming in at $2.98 billion, ahead of the $2.39 billion that analysts called for. 2,403,867 shares of the company's stock were exchanged. Dimensional Fund Advisors LP now owns 98,790 shares of the electric vehicle producer's stock worth $27,492,000 after acquiring an additional 1,894 shares during the last quarter.

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