Tesla misses Model 3 delivery goals but plans to exceed total vehicle numbers


Enlarge / The Model 3 has a more rounded front than the Model S.

On Monday afternoon Tesla sent out a press release detailing vehicle deliveries for the quarter, and the missive carried mixed news. The company only delivered 220 of its new, lower-priced Model 3 in the third quarter of 2017, a far cry from the 1,500 Model 3 deliveries the company projected for Q3 in August, according to the Wall Street Journal. Tesla, however, highlighted deliveries of its more time-tested models—in Q3, the company delivered 25,930 model S and X vehicles, which is a record for the electric vehicle startup.

Production ramp-up has always been a weak spot for the company, and, in 2015, the Model X exposed Tesla’s struggles with quality control most clearly. A slow ramp-up invited criticism from investors, and in response Tesla CEO Elon Musk said the company was focusing on building the “machine that builds the machine,” that is, automating the production process to improve deliveries.

Although X deliveries have improved throughout 2017, the Model 3 was supposed to enjoy some of the fruits of that learning process. During a May financial call, Musk said he hoped for “5,000 vehicles per week at some point in 2017, and… 10,000 vehicles per week at some point in 2018.” Musk said that the company designed the 3 to be much less complicated than the X, with fewer features and less wiring to make the car not only cheaper but faster to produce.

But at a handoff event in July when 30 Tesla employees got the first Model 3s, Musk tempered those initial expectations by saying the next few months would be “production hell.” Still, he said he expected 500,000 Model 3s to be delivered every year after 2018, and he projected just 50,000 deliveries in 2018 as production ramped up.

The low number of Model 3s in Q3 suggest that the production process has not gone quite so smoothly, an issue that Musk will no doubt have to address in the next investor meeting. In a statement to CNBC Monday evening, Tesla blamed production bottlenecks for missing the goal by so much.

“Although the vast majority of manufacturing subsystems at both our California car plant and our Nevada Gigafactory are able to operate at high rate, a handful have taken longer to activate than expected,” the company said in a statement to CNBC.

“It is important to emphasize that there are no fundamental issues with the Model 3 production or supply chain. We understand what needs to be fixed, and we are confident of addressing the manufacturing bottleneck issues in the near-term.”

Still, Tesla is showing that once it gets production going, it has a reliable track record of maintaining that speed. In Q3 of 2017, the company was able to deliver 14,065 Model S vehicles and 11,865 Model X vehicles—numbers that are largely similar to (although slightly more than) what we saw in Q2 and Q1 of this year.

The total delivery count in Q3 2017 was 26,150 vehicles, not including 4,820 Model S and X vehicles that were in transit to customers, Tesla said.

In a press release, the company added that numbers were good as ever for its luxury vehicles. “We had previously indicated that second-half Model S and X deliveries would likely exceed first-half deliveries of 47,077, but we now expect to exceed that by several thousand vehicles. In total, we expect to deliver about 100,000 Model S and X vehicles in 2017, which would be a 31% increase over 2016.”

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