Tesla Model 3 production falls short of expectations after hitting production snags

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Musk said in July that it knows that its production rate for the 3 will look like an S-curve, but it's not yet sure the scale and shape of that S-curve, as the component supply chain for the vehicle includes 30 percent of parts sourced from outside North America, and is subject to significant "force majeure risk".

Investors are missing the big picture with Tesla by worrying about rounding errors on whether Tesla missed or beat delivery guidance by 1,000 units.

Using the actual numbers for the quarter just gone, the required ramp-up is now on the order of 250 times - soaring, steep, sheer. Previously, it had expected to sell slightly more of these in the second half than the first, implying maybe 95,000 for the year as a whole. Production delays are, of course, nothing new to Tesla: The Model S and Model X were both significantly delayed before they finally launched, and the Model 3 is likely no different in that respect. "We understand what needs to be fixed and we are confident of addressing the manufacturing bottleneck issues in the near-term", Tesla noted.

"Most auto launches have hiccups, and Tesla is no exception", Morgan Stanley analysts wrote in a note.

Tesla shares declined 1.2 percent in early trading Tuesday.

Tesla said it produced just 260 Model 3 units during the quarter, citing "production bottlenecks" for the underperformance.

The U.S. automaker plans to operate 14 charging stations in South Korea by the end of this year and eventually increase the number to 25 by end-2018. He predicted that the company's shares would fall about 40 percent in six months, to $210.

"We see the 5k a week production goal to exit 2017 at risk given the lack of disclosure provided in fixing the 'handful' of subsystems that are taking longer than expected", said Cowen and Co analysts, who already rate Tesla an underperform.

Musk somewhat pre-empted the bad news for Q3 in comments made during the previous quarter, where he tried to convince investors to not get bogged down in quarterly figures. It expects to deliver about 100,000 of those models in 2017.

While the results of the Model 3 production are disappointing, sales of the sedan and the SUV Model X climbed to a record for a quarter.