Tesla turns to Model Y, as Model 3 slowly exits "production hell"

Javier Stokes
February 8, 2018

Tesla delivered 1,542 Model 3 vehicles in the quarter, barely making a dent in the reservation list for the new auto, as it faced production delays.

That said, Tesla made $3.3 billion in revenue, largely thanks to the Model 3, while future customers spent tens of millions just to join the queues for the Tesla Semi and Roadster models that Musk showed in November.

"It is important to note that while these are the levels we are focused on hitting and we have plans in place to achieve them, our prior experience on the Model 3 ramp has demonstrated the difficulty of accurately forecasting specific production rates at specific points in time", the company wrote in a letter to shareholders Wednesday. "So to test it, Elon Musk sent up his own Tesla convertible with a dummy astronaut at the wheel, blasting David Bowie's "Life on Mars.' That's right, this is absolutely true: A giant phallus cranking rock 'n" roll, releasing a red convertible into the dark void - and the award for Most Midlife Crisis goes to Elon Musk".

The loss was narrower than Wall Street had expected, however.

Building battery modules for the vehicle remains a challenge in part because Tesla was "a little overconfident" in its ability to make them, Musk said. More than expected by analysts.

Tesla reiterated in its earnings report on Wednesday that it is on target to produce 2,500 of its Model 3 electric sedans by the end of Q1 and 5,000 by the end of Q2.

Falcon Heavy test flight profile
Falcon Heavy test flight profile

"The competitive strength of Tesla long term is not going to be the auto (s), it's going to be the factory, we're going to productise the factory", he said.

He also said Tesla would make capital investments in its planned "Model Y" compact SUV later this year, and that lessons learned from making the Model 3 would be applied to the Model Y.

Those showroom displays helped increase pre-orders for the Model 3, Tesla suggested.

The Model 3 sedan was first announced by CEO Elon Musk in March 2016.

The Model 3 is "the key element" to Tesla's long-term financial stability, said Autotrader executive publisher Karl Brauer.

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