Tesla is lagging behind its goals for production of the Model 3, but the company is confident in its capacity to improve and resolve challenges to reach full production of the 5K Model 3 by the first quarter of 2018.
In a letter to investors, Tesla CEO Elon Musk detailed the challenges that have delayed production of the Model 3, highlighting problems with battery production due to complexity of its assembly.
Musk started the earnings call by acknowledging production issues in great detail. Before that, Tesla recognized in an earnings report for Q3 of this year that it shipped only 222 Model 3. The number is far behind their original goal to produce 1.5K Model 3 cars per week.
Tesla’s CEO noted that the Model 3 has 10,000 unique parts that require a process to be created, and that forces the company to rely on contractors who “sometimes drop the ball.” Musk said this was the case as well regarding delays on the production of Model 3. The readjustments forced Tesla to rewrite software in its assembly line and adapt hardware to bring some of the production “in house.”
The delays could bear some responsibility for the drop on profits that swung from $22 million in 2016 Q3 to a net loss of $619 million in this year’s Q3. This net loss is the worse one predicted for the company by S&P Global Market Intelligence for a $498 million net loss.
That’s why Musk’s tone on the earnings call was one of a leader both bearing responsibility for the problem and in charge of finding a solution.
“We’re doing this call from the Gigafactory because that’s where the production constraint is for the Model 3,” Musk said in the earnings call. “I move myself to wherever the biggest problem is in Tesla. I really believe that one should lead from the front lines and that’s why I’m here.”
By the end of Q1 of 2018, Tesla’s assembly lines need to produce 5k Model 3 cars per week to backup their founder’s expectations.