San Francisco, California - Tesla has pushed back its target for volume production on the new Model 3 sedan by about three months, saying it was difficult
to predict how long it would take to fix all the production
bottlenecks.
The company, led by Silicon Valley entrepreneur Elon Musk, faces a
crucial test in its growth strategy as it ramps up production of
the Model 3, its new sedan that starts at $35 000 (R573 000), about half
the price of its flagship Model S.
Although Tesla has made inroads among luxury car buyers with
the advanced technology and innovative design in its Model S
sedan and Model X SUV, it is the Model 3 on which its long-term
viability rests. The company continues to burn through cash, and
spent $1.1 billion (R18 billion) in capital expenditures in the third quarter of 2017.
It now expects production of the Model 3 to reach 5000 a week by late in the first quarter of 2018, from its original
target date of December.
Battery problems
Tesla said the main constraint was its battery module
assembly line at its Nevada Gigafactory, where the company had
to redesign part of the production process.
"I was really depressed about three or four weeks ago," Musk
said, adding that he is now optimistic because it is clear what
needs to be done. "We are on it, we've got it covered," but it
will take a few months longer than expected, he said.
Tesla made just 260 Model
3 sedans in the third quarter due to what it called "production
bottlenecks". It had planned to build more than 1500. Production delays mean postponed income from sales, and could also
worry the more than 500 000 customers who have put down a refundable
deposit.
Cash-flow problems
Tesla could soon face major cash-flow problems, given the Model
3 delays, a possible factory in China, and plans to develop
other vehicles, including an electric heavy duty truck.
But Musk said he did not expect any significant capital
expenditure in China until 2019, adding that he envisioned a
factory producing at least 200 000 vehicles a year for the Chinese market.
Tesla's continued need for cash is exacerbated by Musk's
insistence on vertical integration, such as making its own
batteries and selling cars directly to customers. That, industry
experts say, is among the reasons Tesla is nowhere close to its
aggressive goal of building 500 000 vehicles annually by 2018, most of them Model 3s.
Tesla delivered 26 150 vehicles in
the third quarter of 2017, an improvement of only 4.5 percent over the same period in 2016.