Cars and Drivers
Elon Musk Delivers the News Investors Feared Most
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Elon Musk & company, also known as Tesla Inc. (NASDAQ: TSLA), delivered news that investors in the electric car company have been most anxious about: It cannot build its Model 3 as fast as expected.
Tesla blamed the slowdown on “bottlenecks.” One set of bottlenecks can turn into two or more, as the industry has shown over and over during decades of production of cars and trucks of all sorts and sizes.
Tesla said the problems were not even close to permanent. But, just months ago, Tesla said it expected the Model 3 would have a smooth roll out. In a statement from the company, it explained the problem:
Q3 production totaled 25,336 vehicles, with 260 of them being Model 3. Model 3 production was less than anticipated due to production bottlenecks. Although the vast majority of manufacturing subsystems at both our California car plant and our Nevada Gigafactory are able to operate at high rate, a handful have taken longer to activate than expected.
It is important to emphasize that there are no fundamental issues with the Model 3 production or supply chain. We understand what needs to be fixed and we are confident of addressing the manufacturing bottleneck issues in the near-term.
The disclosure was light on details, which means investors have no way to tell how serious it is.
Tesla in general is not growing nearly as fast as it has in the past. The company’s numbers show that very clearly:
We had previously indicated that second half Model S and X deliveries would likely exceed first half deliveries of 47,077, but we now expect to exceed that by several thousand vehicles. In total, we expect to deliver about 100,000 Model S and X vehicles in 2017, which would be a 31% increase over 2016.
Major car companies consistently have new gasoline-powered models with sales that grow at that rate or better.
Musk has no more than a few weeks to solve his Model 3 production problem. One more delay and Tesla’s high-flying stock, up 57% this year to $341 a share, will come tumbling down.
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