Tesla's cheaper electric vehicle the Model 3 struggling

Tesla Supercharger rapid battery charging station in Mountain View California

Musk has long said that production of new Tesla cars occurs like an "S-curve", where initial manufacturing is low and slow; when an inflection point is reached, the production speeds up dramatically. What's more, Tesla said that it saw an appreciable increase in Model 3 production rates towards the end of 2017.

Musk had previously predicted that Model 3 production could be ramped up to 20,000 cars per month by December.

Some of these numbers seem a little ridiculous, but considering this is one of the most hotly-anticipated vehicles in recent memory and deliveries only just started a couple weeks ago, it stands to reason that we would see a few owners testing the market to see what they can get.

The company burned through $1.1 billion in cash in that quarter and said in November it would spend roughly the same amount in the fourth quarter.

Although bullish investors have generally waved off early Model 3 problems, instead focusing on the future prospects of Tesla, critics warn that Model 3 issues could sour demand for Tesla's mass-market vehicle, delay sorely needed revenue and compromise the company's ability to raise cash in the future. "We have them hovering about $1 billion in cash". Our 1Q Model 3 delivery forecast of 8k units implies a pace of less than 700 per week.

Despite continued headwinds with the Model 3, Tesla did manage to deliver more of its Model X, Model S, and Model 3 vehicles than in previous quarters. The company now expects to reach its goal of 5,000 vehicles per week by the end of the second quarter. Investors, on the other hand, will probably focus on the company's cash flow and the potential effect, which production delays may cause on its performance.

Image mashable
Image mashable

Buyers of the latest bonds have since taken a hit, and it would likely cost Tesla more to borrow in that market again. Tesla reported it delivered 101,312 Model S and X vehicles in 2017, a 33% increase over 2016.

"Perhaps the issues that have significantly hobbled the Model 3 ramp really can be fixed in a cost-effective manner and shortly cycled past (although this did not happen in 4Q)", Brinkman said.

"We're also very appreciative of our Model 3 customers, who continue to stick by us while patiently waiting for their cars". But Tesla has skipped many incremental steps used by established carmakers when launching new products.

Tesla shares were down at $313.02 in afternoon trading.

"Tesla is always a quarter away, and now you have to wait six months to get your report card on your investment thesis", Osborne said Wednesday.


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