Published: Fri, November 03, 2017
Research | By Francis Brooks

Tesla delays Model 3 production as shares plunge

Tesla delays Model 3 production as shares plunge

Musk goes on the defensive.

After announcing what is seemingly a 3-month delay in the production ramp of the Model 3 yesterday, Tesla says that it is now updating the delivery timeline of Model 3 reservations over the next 24 hours.

Since the launch of the Model 3, the $35,000 vehicle in Tesla's battery-electric lineup, that has held true.

"While Tesla stock is indicated down afterhours, we're not sure that the [third quarter] print changes the perception around the longer-term tenets of the Tesla story (leading advantages in batteries and tech, etc.), although we think there are a number of issues on those tenets". It churned out just 260, Tesla said earlier this month. He's keeping virtually an around-the-clock vigil at the Model 3 assembly plant, personally supervising efforts to get production on track, Fortune reports.

Tesla's problems do not stop at Model 3 production either, with the company posting a record quarterly loss of £468m.

Energy generation and storage revenues soared from $23.3 million in the third quarter of 2016 to $317.5 million in the reported quarter.

Musk tried to put a positive spin on the future by looking back at the past. Vetr downgraded Tesla Inc (NASDAQ:TSLA) on Friday, August 28 to "Strong-Buy" rating.

[T] he Model 3 production process will be vastly more automated than the production process of Model S, Model X or nearly any other vehicle on the market today, and bringing this level of automation online is simply challenging in the early stages of the ramp.

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Investors weren't so sure: Tesla shares traded down 5.1% to $304.70 as of 7:45 NY, before the start of regular trading. For his part, Musk admitted Tesla ultimately had to accept blame for its current problems.

"If you talked to me three weeks ago, I would have been quite pessimistic", Musk admitted to investors Wednesday.

Bolstering Munster's optimistic view, many skeptics said Musk could not even build an electric vehicle. Musk did seem to dismiss the Model 3's stumble-start in the call, as well.

The stock is up 40.51% this year. Now, that production rate is to be expected by "late Q1 2018" - meaning early spring. Kallo also warned that Tesla Inc (TSLA)'s gross margin will decline sequentially again in the fourth quarter because of the Model 3 ramp, but that should be temporary. But production bottlenecks for Model 3 weighed on results and guidance.

In mid-October, The Wall Street Journal reported that Tesla had reached a deal to open a factory in Shanghai's Free Trade Zone. Tesla now has more than 400,000 advance reservations for the Model 3, but how long potential buyers will wait to take delivery is uncertain - all the more so UBS analysts wrote, because "competing EVs are coming, and a long delay could reduce (Tesla's) market share opportunity". Some observers believe the Chevy model has been picking up customers who have begun writing off Tesla.

Nomura holds 0.06% of its portfolio in Tesla Inc (NASDAQ:TSLA) for 62,933 shares.

"Tesla needs to slow down and more narrowly focus its vision and come up for a breath of fresh air", Cowen and Co analysts said in a note. "It's really the only way to make the cars affordable in China... but it's three years out", Musk said.

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