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Published: Fri, April 06, 2018
Research | By Jennifer Evans

Tesla Misses Model 3 Production Target for First Quarter

Tesla Misses Model 3 Production Target for First Quarter

"It has been extremely hard to pass the 2,000 cars per week rate for Model 3, but we are finally there". That compares with a total of 29,870 vehicles (including 1550 Model 3s) in the final three months of 2017.

The quarterly production rate of the Model S, X and Model 3 combined increased by 40% from the previous fourth quarter.

Hundreds of thousands of customers pre-ordered Tesla's hotly anticipated Model 3 within a week of its grand reveal.

If Tesla succeeds in hitting its goal, it will not need to raise capital later this year.

The results are a bit of a mixed bag for Tesla. Following the release of its results for the quarter, its shares surged 7% in premarket hours, and later eased up 5% around $267 in midday trading.

There was ample fodder for both bulls and bears in the Q1 vehicle production results released by Tesla yesterday. Tesla has become a very unusual share animal - what analysts call a "story stock".

It admitted that delays had lost it some customers for the Model 3 but said that net orders remained stable.

"We believe the backlog for Models S and X remains solid but that this is an area to monitor given the sequential declines".

All commentators agree that Tesla's main game is an affordable but capable mass-market vehicle - enter the Model 3, priced at US$35,000 (A$45,500) for the cheapest configuration plus import costs (although only the expensive configurations are now being made, and if you are interested the right-hand drive version won't come before perhaps late 2019).

"This is the most highly contested, I guess, debate of any company that I cover in the auto industry". Shorts are, they're well aware that there is this catalyst coming that might actually be positive.

Tesla also sought to dispel quality concerns for the Model 3, which GTM reported on last month.

Announced in March 2016, and originally set for launch by the end of 2017, the Model 3 generated huge interest, with 450,000 (paid) reservation deposits plonked down. Notably, the company's Model 3 output also rose exponentially and it was able to double its weekly production rate during the quarter by swiftly addressing supply chain and production bottlenecks.

Yet there is a silver lining to Tesla's production rate miss. A small number of those workers were invited to voluntarily help build Model 3 cars instead. In a research note Tuesday, analysts at JPMorgan recommended selling Tesla stock on the earnings upswing, viewing the pop on production progress as a ideal time to lock in profits and get out.

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