Tesla suffers worst quarter ever as production delays hit

Posted on 5 Nov 2017 by Michael Cruickshank

US automotive manufacturer Tesla has suffered its worst-ever quarterly loss as the company struggles to increase vehicle production rates.

A Model 3 under construction on a Tesla assembly line. Image courtesy of Tesla.
A Model 3 under construction on a Tesla assembly line. Image courtesy of Tesla.

In a statement, Tesla announced that it had taken a $619mn net loss in the third quarter of 2017, the largest such loss in the history of the company.

These losses come at a time when the company is struggling to increase production of it first ‘mass market’ vehicle, the Model 3.

The Model 3 is an all-electric vehicle intended for average consumers, rather than the luxury vehicles already built by the company.

Following its unveiling, the company took hundreds of thousands of pre-orders and now needs to prove that it can deliver on these in orders to justify its inflated stock price.

Earlier, Tesla had stated that it would be producing 5000 of the Model 3 vehicles by December this year, however now the company has admitted that it will miss this target.

Instead, Tesla now says that this production rate will not be reached until “late in Q1 2018”, representing a significant slip for the company.

“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,” the company said in a statement.

The primary cause of these production bottlenecks are unclear, however, the large losses the company has faced this quarter are likely related to attempts to spend big to increase production at its primary factory in Hawthorne, California.

Earlier, CEO Elon Musk had described the process as “production hell” and stated that they were diverting further resources into this effort.

These production delays have also been likely exacerbated by a slew of layoffs at its Hawthorne factory, reportedly for “performance-related reasons”.

While the Model 3 certainly represents a revolutionary change to the automotive industry, much is riding on Tesla to increase its production to a reasonable level, and prove to its detractors and competitors that mass-producing EVs is possible.

Positively for Tesla, however, these production delays have not put a dent in demand for the Model 3, with the company reporting that it continues to receive an increasing number of orders for the vehicle.