Musk, Tesla face pivotal test

Tesla, the upstart that has defied the rules of the auto industry, is finishing up a year when the challenges of manufacturing a mass-market electric car in large quantities finally hit home.

After years of bragging about its advanced manufacturing techniques, the Silicon Valley automaker faced a reality check when it came to making its first mainstream car, the Model 3 electric sedan.

Output failed by a wide margin to meet CEO Elon Musk’s promise of 5,000 vehicles a week by the end of December. Tesla could face a make-orbreak 2018.

Speeding the rollout of the Model 3, which at about $35,000 will be roughly half the starting price of Tesla’s luxury models, is essential to the company’s financial health.

“Is this the year investors will say, ‘Enough’s enough,’ or will they continue to fund Tesla?” Autotrader.com analyst Michelle Krebs said. “That’s the big question.”

Investor enthusiasm remains high. In April, Tesla briefly passed General Motors as the most valuable automaker in the USA.

Tesla shares sailed to an interday high of $389.61 in September but have since settled back 20 percent, closing Wednesday at $311.64.

Tesla is valued at about $53.3 billion, less than GM’s $59.4 billion.

Tesla’s main focus is on the Model 3, which will require exiting what Musk has called “production hell.”

Tesla denied reports that workers at the automaker’s factory in Fremont, Calif., were assembling some parts by hand.

Tesla did acknowledge it hit significant “bottlenecks” in production.

Morgan Stanley auto analyst Adam Jonas estimated that Tesla would make 8,000 Model 3 vehicles in the first quarter, falling tens of thousands short of the company’s initial hope.

Musk blamed the company’s underwhelming Model 3 production partially on an unidentified supplier that failed to live up to expectations.

He acknowledged that the company struggled to perfect the newly automated and advanced processes it designed to make the Model 3.

“2018 should be a year of reckoning for Tesla,” AutoPacific analyst Dave Sullivan said in an email.