Tesla delays Model 3 target on setbacks
SAN FRANCISCO • Tesla Inc. delayed a target for its critical Model 3 sedan as production setbacks at its battery gigafacatory contributed to record cash burn by Elon Musk’s electric-car maker.
The company now expects to make about 5,000 of the cars per week by late in the first quarter of 2018, rather than by the end of this year, CEO Musk wrote in a letter to shareholders Wednesday. The main constraint holding back output is on the assembly line that packages battery cells at Tesla’s gigafactory near Reno, Nev.
“While we continue to make significant progress each week in fixing Model 3 bottlenecks, the nature of manufacturing challenges during a ramp such as this makes it difficult to predict exactly how long it will take for all bottlenecks to be cleared or when new ones will appear,” Musk and chief financial officer Deepak Ahuja wrote.
The early setbacks Tesla’s had making its cheapest model yet lengthens the wait for hundreds of thousands of reservation holders and extends the payoff period for investors who want to start seeing returns from the billions the company has spent to expand.
While Tesla shares have surged for the year, they’ve slipped six per cent since the carmaker said last month that bottlenecks led to fewer Model 3s produced in the third quarter than forecast.
“It’s interesting to see them address the bottlenecks head-on, and it’s at the gigafactory,” said Sam Korus at Ark Investment Management i n New York. “The Model 3 is a few months late, which is not surprising.”
Tesla burned US$ 1.42 billion in cash in the third quarter, surpassing the $1.16 billion it went through in the previous quarter.
The company is spending heavily on both its auto assembly plant and at the gigafactory. Tesla forecast about US$ 1 billion in capi t al expenditures in the fourth quarter after shelling out $ 1.1 billion in the three months through September to add manufacturing capacity and build its customer support infrastructure.
Some of Tesla’s manufacturing lines, including those for drive units, seats, paint and stamping, have the ability to make more than 1,000 cars per week during “burst builds of short duration,” Musk and Ahuja said. Battery pack assembly, body shop welding and final assembly are able to make about half as much and are “ramping up quickly,” they wrote.