Tesla Model 3 Production Woes Continue, But Driver Reviews Are Positive
Electric car manufacturer Tesla (TSLA) apparently has more than a long way to go before it can meet its goal of making 5,000 Model 3 sedans per week by late in the first quarter.
XAutoplay: On | OffA report from Elektrek on Thursday estimates that Tesla built just 180 Model 3 vehicles last month, and a total of 440 vehicles since the start of production in July. Tesla once had a goal to build 5,000 Model 3 vehicles per week by late December, before recently pushing that date back a few weeks.
Production troubles aside, test drives of the Model 3 by two equity analysts elicited positive reviews, with one saying that passion for the Tesla brand is comparable to how Apple (AAPL) fans feel about the iPhone.
Tesla acknowledged production woes with its Model 3 when it reported third-quarter results on Nov. 1 that missed earnings expectations by a wide margin. Production delays at Tesla are among the reasons a large amount of Tesla shares are sold short.
Tesla said it delivered 26,150 vehicles in the third quarter, up 4.5% from the year-ago period, but added that “production bottlenecks” were crimping its ramp-up for the Model 3. The company wouldn’t specify the number of Model 3s produced in October.
“The initial phase of manufacturing any new vehicle is always challenging, and the Model 3 production ramp is no exception, particularly given our focus on highly automated manufacturing processes that will ultimately result in higher volumes at significantly lower costs,” Tesla said in its quarterly report.
“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.
Nomura analyst Romit Shah on Thursday issued a positive report on Tesla and said enthusiasm for the Model 3 is similar to how Apple fans admire the iPhone.
“Apple succeeded because the world shifted from PCs to smartphones and Apple had the best product,” Shah wrote in a research note to clients Thursday. “Similarly, we believe there is a secular shift today from internal combustion engines to electric vehicles and we think Tesla has the best product.”
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If Tesla can overcome operational challenges, Shah added, “We believe a strong affinity for the Tesla brand will translate into unprecedented revenue growth and strong cash flows.”
Shah reiterated a buy rating on Tesla and price target of 500.
Tesla shares lost 0.5% to close at 302.99 on the stock market today. Tesla shares are down about 23% from a record high of 389.61 set on Sept. 18.
Shah’s report followed his test drive of a Model 3 on Wednesday.
“We aren’t professional car reviewers, but we walked away believing that Tesla will be selling as many cars as it can produce for a long time,” Shah wrote.
Also test-driving the Model 3 this week was RBC Capital Markets analyst Joseph Spak.
“The Model 3 exceeded our expectations, specifically on the interior and user interface,” Spak wrote. “Operationally, Model 3 production delay certainly proved disappointing, but company appears confident that issues are fixable.”
Spak has a sector perform rating on Tesla and price target of 340.