The past couple of months have not been pleasant for Tesla. Production delays of Model 3, the firing of 700 workers, and various parts of the Model 3 being handmade have put a negative light on the electric car company. Yesterday, Tesla announced their Q3 results and the news isn't pretty.
Tesla reported a $671 million loss for the quarter, making it the largest quarterly loss. The company burned through $1.42 billion in cash in the quarter as it worked on ramping up Model 3 production. Revenue was slightly up to $2.98 billion.
Tesla also revealed that it is pushing back its ambitious goal of 5,000 Model 3s per week by the end of this year to the end of the first quarter of 2018. On a call with analysts, Tesla CEO Elon Musk said issues at their Nevada Gigafactory was the primary constraint for Model 3 production with a subcontractor that “really dropped the ball.” Software used at the plant had to be rewritten from scratch and mechanical and electrical elements of one part of the plant had to be redone.
Musk also said the welding for the mostly steel body for the Model 3 has proven to be quite complex.
“There are thousands of processes to build the Model 3. We can only move as fast as the least competent elements of that mixture.”
Only three months ago, Tesla was claiming that it would build 10,000 Model 3 cars per week in 2018. When asked if Tesla would hit this target, Musk reportedly was silent for about 10 seconds before giving an answer. When they reach 5,000 Model 3s per week, the company will introduce a “capacity addition” to increase the run rate to 10,000 per week. No mention of how long this addition would take place.
But there are more issues than Tesla is letting on. Various reports over the past month have said that significant portions of the Model 3 were being made by hand and that body line equipment used on the production line was only getting installed. Tesla has denied these reports.
Shares in Tesla have dropped 7.1 percent to $298.24 as of 2:26 PM.
“We left the call frustrated with the lack of transparency from Tesla management,” said Jeffrey Osborne, a Cowen & Co. analyst in a note to clients.
“Elon Musk needs to stop overpromising and under delivering and the board should rein in a CEO who publicly shares his aspirational goals that have rarely been hit.”