Tesla delivers on Model 3 production

Tesla Inc said Tuesday that it produced 80,142 cars in the third quarter, a 50% rise from the second quarter, as the Model 3 sedan began rolling off its assembly line in larger volumes.

The total included 53,239 Model 3s, nearly doubling the number Tesla made in the previous quarter. That implies that the company’s output averaged about 4,000 Model 3s a week, fewer than the 5,000 that Elon Musk, the chief executive, has been pushing for.

The increase in production is a rare bit of good news for a company that has been shaken by a succession of unsettling developments over the last two months.

Last week, the Securities and Exchange Commission sued Musk in a securitiesfraud case, and two days later Musk accepted a settlement with the agency.

The case arose from Musk’s tweet Aug 7 in which he said he planned to turn Tesla into a private company at $420 a share and had “funding secured,” a plan that turned out to be less fleshed out than he suggested.

The SEC is still looking into Musk’s past claims about the company’s production goals.

The Model 3, its most affordable offering so far, is crucial to Tesla’s success. But while the company has increased the production of Model 3s, Tesla has run into a new problem: It cannot seem to deliver all the cars it is making to its customers. Musk called this “delivery logistics hell.”

“A more important test will be whether Tesla can clear up its shipping issues in the fourth quarter,’’ analysts said.

“The real question now is if Tesla can really sustain this pace, particularly in light of the delivery issues the company has faced recently,” said Jeremy Acevedo, manager of industry analysis at Edmunds, an auto-data firm.

Tesla reported that it had 8,048 Model 3s and 3,776 other cars in transit to customers at the end of the third quarter.

“With production stabilised, delivery and outbound vehicle logistics were our main challenges during Q3,” the company said in a statement. “We made many improvements to these processes throughout the quarter, and plan to make further improvements in Q4, so that we can scale successfully.”

At the same time, the company noted “the headwinds we have been facing” as a result of the trade tensions between China and the Trump administration.

“Tesla vehicles shipped to China are now hit with a tariff of 40%,’’ it said.

China is the world’s largest market for electric vehicles.

“Taking ocean transport costs and import tariffs into account, Tesla is now operating at a 55% to 60% cost disadvantage compared to the exact same car locally produced in China,” the company said.

Tesla is in the beginning stages of planning a factory in Shanghai.

Musk has vowed that Tesla will generate a profit and show positive cash flow in the third and fourth quarters, thanks to the Model 3.

But while the company is making more cars, the delivery problems could hurt its bottom line because the company can book revenue only when it puts its cars into customers’ hands.

The company needs revenue because it has suffered substantial losses and uses up nearly $1 billion in cash almost every quarter.

At the start of the third quarter, Tesla had $2.2 billion in cash, but it owed suppliers $3 billion. It also had about $11 billion in debt.