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Tesla again delays Model 3 production

Russ Mitchell, Los Angeles Times on

Published in Business News

SAN FRANCISCO –– Production hell continues at Tesla.

The new Model 3, crucial to the company's success, won't hit full-scale production until the end of June, Tesla said Wednesday –– nearly a year after the company began manufacturing the car in small numbers.

Throughout last year, Tesla CEO Elon Musk trumpeted a production level of 5,000 a week by December 2017. In November, he pushed that goal to the end of March 2018. Now that target won't be hit until the end of June. The electric-car maker said in an online statement Wednesday that it expects to produce 2,500 a week by the end of March.

Only 1,550 Model 3s were delivered in 2017's fourth quarter, the company said in an online statement Wednesday. That's on top of the 220 Model 3s the company delivered in the third quarter, for a total of just 1,770 since the first deliveries in late July.

Serious problems turned up last summer at both the company's Fremont, Calif., auto assembly plant and its "Gigafactory" battery plant in Nevada that put the company in what Musk called "production hell."

Tesla is burning billions in cash as it struggles to achieve its vision of mass-market electric cars powered by Tesla-brand solar roofs through Tesla-brand home storage batteries.

 

But the roofs have yet to be produced beyond the research and development stage, and sales of the storage batteries are growing slowly.

It's possible Tesla could pull everything together before cash runs out. Certainly the stock market thinks so. Shares have been under pressure lately but still give the company a market value of about $53 billion, analysts say. But a return to the financial markets for more billions in investment capital will be necessary. How long stock and bond investors will continue to pump sufficient funds into the company is an open question.

Tesla also said it had delivered 15,200 Model S and 13,120 Model X luxury cars in the fourth quarter, a 9 percent increase over third-quarter deliveries. Full-year 2017 vehicle deliveries reached 101,312, 33 percent higher than 2016.

Tesla's announcement "isn't much of a surprise" because of the automaker's previously known Model 3 production problems, but if the bottlenecks continue they could cause Tesla serious problems, said Jessica Caldwell, executive director of industry analysis at Edmunds.com.

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