Tesla production snags delay Model 3 electric car

Nathan Bomey

The wait to get Tesla's highly anticipated Model 3 electric car just got even longer.

The mass-market electric sedan will be delayed after the Silicon Valley automaker hit production snags, including difficulty assembling the complex batteries that power the vehicle.

Tesla acknowledged Wednesday that it would not achieve its previous goal of hitting a production rate of 5,000 Model 3 vehicles per week by the end of the year, instead pledging to do so by the "late" first quarter "based on what we know now."

Model 3.

"Obviously there are bottlenecks," CEO Elon Musk said on a conference call. But "in the vast scheme of things this is a relatively small shift."

With delays stacking up, the company swung from a $22 million profit in 2016's third quarter to a net loss of $619 million, much worse than S&P Global Market Intelligence's projection of $498 million.

Musk said he is working from the company's battery factory, where the bottlenecks are concentrated due to missteps in installing automated processes.

"I move myself to wherever the biggest problem is in Tesla," he said. "I really believe that one should lead from the front lines and that’s why I’m here."

The wait for a Model 3 was already quite long, compared with auto industry standards. With several hundred thousand people placing refundable deposits for the vehicle, anyone who orders a car now is unlikely to receive it until at least 2019, and possibly later.


The company also appeared to back off Musk's previous pledge to hit a production rate of 10,000 weekly vehicles sometime in 2018, saying in a letter to investors that would come sometime after the 5,000 benchmark is achieved.

Musk acknowledged the difficulty in beginning manufacturing of the Model 3, saying that the process is highly automated and that Tesla is intent on revolutionizing automotive production and not following standard industry practices.

"I was really depressed about three or four weeks ago" when the company hit snags, he said. "Now I can see a clear path to sunshine."

Tesla will also make 10% fewer units of the Model S sedan and Model X crossover in the fourth quarter to reallocate manufacturing resources to the sputtering Model 3.

Still, the company said the Model 3 would overcome those challenges and hit a breakeven point in gross profit margin by the fourth quarter of 2018.

Musk also defended the company's recent firing of hundreds of workers following performance reviews, blasting reporters who suggested it was an unusual review and comparing the move to General Electric's famous annual decision to remove low performers.

The company, he said, has high standards.

"If they are not high, we will die," he said. And reporters who breathlessly wrote about the firings "should be ashamed of themselves for lacking journalistic integrity."

Also Wednesday, Tesla reported third-quarter revenue of $2.98 billion, up 29.9% from a year earlier. That edged S&P Global Market Intelligence expectations of $2.94 billion.

Tesla's stock fell 3.6% to $309.64 after the bell.

Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.