Model 3 production delays may require Tesla to raise more cash

Janie Parker
January 6, 2018

Model 3s are finally getting delivered to non-employees - we got ours last week - which means an end to the NDAs and no-reselling agreements Tesla made employees agree to in order to get priority delivery of the vehicle. Tesla didn't come close to achieving an initial goal to manufacture that many sedans a week by the end of previous year.

On the back of these revelations, shares in Tesla fell by 1.7 per cent to $312 in after-market trading. The new Model 3, crucial to the company's success, won't hit full-scale production until the end of June, Tesla said Wednesday - almost a year after the company began manufacturing the auto in small numbers.

Tesla ended September with about $3.5 billion cash in hand and projected another $1 billion in capital expenditures during the last three months of the year.

Tesla's luxury Model S sedans and Model X SUVs regularly require fixes before they can leave the factory and quality checks have routinely revealed defects in almost all of these models inspected after assembly, Reuters reported in November, citing sources. During the company's third quarter, Tesla manufactured 260 Model 3s.

Analysts have again expressed concern over whether Tesla can secure the gross margins on the cars it is aiming for, whether customers will still want the auto, and how slower production rates affect the company's other capital-intensive ambitions.

As a result, now that owners have their cars and can do what they want with them, some of them are trying to make a little side cash on Turo, a website where owners can rent their cars out for a daily fee.

"In the last seven working days of the quarter, we made 793 Model 3s, and in the last few days, we hit a production rate on each of our manufacturing lines that extrapolates to over 1,000 Model 3s per week", the company said in a statement.

But the company has so far has pushed back its target of making 5,000 Model 3's per week twice.

All iPhones, iPads and Mac devices affected by 'Meltdown' and 'Spectre' bugs
Apple also announced that it will be releasing patches for Spectre in the form of an update to web browser Safari in a few days. Now Apple has also issued a statement on the same saying all Macs and iOS devices are impacted by this security flaw.


Including Model S sedans and Model X crossovers, Tesla delivered a total of 29,870 vehicles during the fourth quarter.

Tesla announced delivery and production numbers for the fourth quarter of 2017 on Wednesday. Full-year 2017 vehicle deliveries reached 101,312, 33% higher than 2016.

Buyers of the latest bonds have since taken a hit, and it would likely cost Tesla more to borrow in that market again.

"We're also very appreciative of our Model 3 customers, who continue to stick by us while patiently waiting for their cars".

"Perhaps the issues that have significantly hobbled the Model 3 ramp really can be fixed in a cost-effective manner and shortly cycled past (although this did not happen in 4Q)", Brinkman said.

That pace of production is still below that of many carmakers.

"Tesla is always a quarter away, and now you have to wait six months to get your report card on your investment thesis", Osborne said by phone Wednesday.

Other reports by TheDailyFarc

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