Tesla (NASDAQ:TSLA) CEO Elon Musk shared a short video Sunday of Model 3’s production body line in action. This was in response to reports from several outlets claiming that Tesla’s Model 3 “production bottlenecks” issues, the $35K sedan designed to make the electric car maker a mainstream car manufacturer, were the result of problems with the company’s advanced robots.
Musk’s video, which is not edited to make the production process easier to follow, also comes two days after The Wall Street Journal reported that major portions of the ultra-anticipated Model 3 were still being made by hand : apparently because factory equipment was not yet ready for use.
Tesla immediately pushed back on that report, saying “This reporting is fundamentally wrong and misleading. We are still in the beginning of our production ramp, but every Model 3 is being built on the Model 3 production line, which is fully installed, powered on, producing vehicles, and increasing in automation every day. However, every vehicle manufacturing line in the world has both manual and automated processes, including the Model S and Model X line today. Contrary to the Journal’s reporting, this is not some revelation”.
Tesla last week released its third-quarter vehicle production numbers. The report showed the company manufactured only 260 Model 3s in September, far short of its goal of 1,500 cars Musk predicted in July.
That said, it should be noted that besides the fact Musk has already alluded to M3 production challenges — back in July, when he showed off some of the first cars of his new Model 3 sedan, he said Tesla was “deep in production hell” — both the Model X and Model S, which in the past have gone thru sub-300 vehicle delivery quarters, are currently doing just fine production-wise. In fact, out of the 26,150 total vehicles Tesla delivered in the third-quarter, 14,065 were Model S, and 11,865 were Model X, making the quarter an “all-time best” for both of those models. So, there is no reason why Model 3 should not follow a similar trajectory, meeting in the process Musk’s expectations to ramp the model’s production to 10,000 vehicles per week by the end of 2018.
News of the Model 3 production challenges will more likely shake weak hands but not Tesla investors who believe in the company’s overall long term model. Tesla stock has soared 65% year-to-date versus the S&P 500 index gaining 14% and the brand has apparently lost none of its appeal. In fact, Gene Munster, one of Wall Street’s most revered analysts predicts that “the Model 3’s value, in combination with its technology, has the potential to change the world and accelerate the adoption of electric and autonomous vehicles.”
If you combine that statement with that of Bloomberg’s David Fickling who says that electric cars are reaching “a tipping point” with nearly 80% of the global auto market currently “pushing toward phase-out of petroleum cars and adoption of electric vehicles,” then it’s not hard to see where Tesla could fundamentally stand as a company five years from now. Heck, even with a total debt of more than $9.5 billion and red profit margin of 7.6%, the name still has a market cap of more than $57 billion, surpassing that of rival Ford Motor Co. (NYSE:F) by $8 billion while challenging General Motors’ (NYSE:GM) $65 billion market value.
At last check, Tesla’s stock, which rallied nearly 5% last week during its 5 session win streak, was up $3.66 to $346.60 in pre-market trade Tuesday. TSLA has a 52 week range of $178.19 – $389.61.
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