In July, Tesla Chief Executive Elon Musk warned that “production hell” was ahead for Tesla’s new and long-anticipated Model 3.

He wasn’t kidding. On Monday, the company said it had only produced 260 Model 3 cars from the start of production in late July through September 30, far short of the 1,500 the company had forecast.

That’s bad news for Tesla. The success or failure of the Model 3 could make or break the company.

The car is billed as a more affordable alternative to Tesla’s luxury Model S and Model X. The company had planned to be churning out 20,000 of them a month by December, and 500,000 a year by the end of 2018.


In a note to investors Monday, Tesla blamed “production bottlenecks” but offered no details.

“It is important to emphasize that there are no fundamental issues with the Model 3 production or supply chain,” the company said. “We understand what needs to be fixed and we are confident of addressing the manufacturing bottleneck issues in the near-term.”

The company did not say whether its December or 2018 production forecasts remain on track.

The Model 3 production numbers were included in an investor message, posted online, that touted “our all time best quarter for Model S and X deliveries.” Tesla delivered 25,930 of those cars, up 4.5% over the same quarter last year.


Tesla critics saw little to crow about. Sales of the Model S and Model X have remained in the low to mid-20,000s for the last four quarters, sowing doubts about whether sales growth for those cars is nearly tapped out.

“The most shocking thing about this report isn’t even the low Model 3 production number,” said Mark Spiegel of Stanphyl Capital. “It’s that Model S and X sales were only up 4.5% year-over-year despite massive discounting and before all the luxury EV competition arrives next year from Jaguar and Audi and in 2019 from Mercedes and Porsche. This is supposed to be a hypergrowth company.”

Although sales are tiny compared with the major auto companies and Tesla has spent billions in cash without profit, its stock price has exceeded that of Ford and General Motors.

In the last three weeks, however, Tesla’s stock is down around 10%. It closed up 43 cents Monday to $341.53 but fell in after-hours trading.


Some workers at the Tesla factory in Fremont, Calif., are attempting to organize a union. State legislation passed in September will force companies that offer state-paid rebates on their electric vehicles to prove their labor practices are fair. The rules on what counts as fair are yet to be written.

The Model 3’s stated price ranges from $35,000 to near $60,000, depending on options. The cars now qualify for a $2,500 state rebate and a federal rebate of $7,500. If production reaches Tesla’s forecasts, however, the federal subsidies will run out sometime next year.

Tesla has said that more than 350,000 people have paid $1,000 each in refundable deposits to hold a place in line.

russ.mitchell@latimes.com


Twitter: @russ1mitchell

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