Manufacturing 'bottlenecks' hinder production of Tesla's crucial Model 3 EV

Loup Ventures managing partner Gene Munster said Tesla's Model 3 miss could chip away at investor confidence in the company's ability to meet its production goals.

The company reports there were 4,820 Model S and Model X vehicles in transit at the end of the quarter (and 40 Model 3 newbies, apparently).

"It is important to emphasize that there are no fundamental issues with the Model 3 production or supply chain", Tesla explained.

Tesla said yesterday that a handful of systems at its Fremont plant in California and its battery factory in Reno, Nevada, "have taken longer to activate than expected".

Production ramp-up has always been a weak spot for the company, and, in 2015, the Model X exposed Tesla's struggles with quality control most clearly.

While Model S and Model X deliveries are breaking records, portraying a 4.5 percent increase from Q3 2016 and a 17.7 percent growth from Q2 2017, the Model 3 is way behind with production figures at 260 and delivery at 220.

On July, electric auto manufacturer #Tesla officially launched its latest and most affordable automobile yet, the mass-market #Model 3 sedan. That's way short of the 1,000 units target set by the company, with blame falling on "production bottlenecks". Total orders for Tesla's Model 3 tumbled earlier this year to 455,000 from a high of 518,000.

But Tesla only built 260 and delivered 220 Model 3s for the quarter ending September 30. The statement goes further to say that Tesla is working to resolve production issues. Tesla sold these vehicles in the quarter to employees and investors.

Musk said on a previous earnings call that Tesla had learned from the Model X production problems and designed the Model 3 to be much easier to manufacture. CEO Elon Musk had in May predicted that Model 3 rollout in 2017 will eventually reach 5,000 weekly, a bold forecast that has not materialized. Who really knows - likely not even Musk - when Tesla will be able to hit that exponential Model 3 production ramp. While competition in the market is expected to heat up in the medium-term, with luxury brands such as Volvo, Mercedes, and Porsche all doubling down on their EV plans, Tesla's premium lineup may still have some scope for growth.