Tesla Production Output Not Up to Par for Model 3 Forecast

Tesla Inc. has struggled in producing its least expensive model just after its debut, setting back the mission of CEO Elon Musk to reach the mainstream consumer.

Only 260 of its Model 3s were built by the automaker during the three-month quarter ending in September, which was less than 20% of its forecast of 1,500 units.

Output of the new sedan that has a base price of $35,000, about half the cost of the cheapest Model S, was lower than had been expected due to bottlenecks that were not specified, said the company.

Musk has created great enthusiasm about the future of the electric vehicle and has other automakers such as General Motors, Daimler AG and Volkswagen AG stepping up to the line to compete.

However, what has not been done by Tesla is prove it can be a mass manufacturer. The slow production start of Tesla’s Model 3, which has been designed to facilitate quicker assembly, reignites the worry that Tesla will continue to struggle in reaching its lofty targets for production made by CEO Musk.

An analyst on Wall Street said he would be surprised if there was anyone who would say they were surprised by Tesla coming up short. He added that when Musk gives out a prediction, everyone knows that it is extraordinarily ambitious.

Tesla stock was down 1.5% in trading prior to the opening bell on Tuesday. The stock has increased by 60% since the start of 2017 through the close of business on Monday.

During the third quarter, Tesla manufactured 25,335 vehicles which were slightly down from its quarter ending in June.

Musk had warned that after handing the keys over to the first Tesla Model 3 owners three months ago, that it would be hard to ramp up output of the vehicle, which had almost 500,000 reservations through the early part of August.

While the results of the Model 3 production are disappointing, sales of the sedan and the SUV Model X climbed to a record for a quarter.

Deliveries during the second six months of 2017 will exceed the first six months by thousands of units, said the electric carmaker based in Palo Alto, California.

Musk has announced previously that the production of the new Model 3 would grow in an exponential rate and tweeted that Tesla would make close to 100 vehicles in August and over 1,500 during September. He also projected that Tesla would be able to reach a production level for the Model 3 of 20,000 vehicles per month by December.