Tesla CEO Elon Musk has called the company "a drama magnet" compared to SpaceX, The Boring Company, or any of Musk's other endeavors. Since the launch of the Model 3, the $35,000 vehicle in Tesla's battery-electric lineup, that has held true. Now in Q3, the company's financial statement reflects more of that drama, good and bad. Wednesday night, Tesla posted another loss, greater than the one before it, but with revenues and sales hitting record highs at the same time.

According to numbers released today (PDF), Tesla posted a $671 million loss on total revenues of nearly $3 billion in the third quarter of 2017.

Compare that to 2017’s second quarter, where Tesla posted a loss of $401 million after total revenues of $2.7 billion.

In a letter to shareholders, Tesla noted that it received "record net orders" for the Model S and X in Q3—the two automotive products that the company seems to be able to push out with consistency. This earnings call was especially anticipated in advance of the Q3 production numbers that Tesla posted in early October. While results for the Model S and Model X were good—25,930 older model luxury cars were delivered in the quarter, beating the company’s estimates for the quarter—new Model 3 deliveries were startlingly bad. Although the company had promised to deliver 1,500 Model 3s in Q3 2017, it only delivered 266 total. Tesla CEO Elon Musk blamed production bottlenecks, and The Wall Street Journal reported that “major portions” of the Model 3s that had thus far been delivered were built by hand.

The view from "production hell"

In opening remarks on an earnings call today, Musk said he was "doing this call from the Gigafactory because that’s where the production constraint is."

"I always move…myself to the place where the biggest problem is... I believe one should always lead from the front lines.”

Musk's comments confirmed reports from Reuters earlier this week that the Model 3 production issue was due to battery assembly problems. The Reuters report was based on comments from Panasonic CEO Kazuhiro Tsuga, who said that bottleneck issues may be nearing an end. (Panasonic, you’ll recall, has partnered with Tesla to run the Sparks, Nevada, Gigafactory where most of the Model 3 battery packs are supposed to be built, as well as the Buffalo Solar City panel factory.)

Tesla's shareholder letter published on Wednesday afternoon gave details on the problem:

To date, our primary production constraint has been in the battery module assembly line at Gigafactory 1, where cells are packaged into modules. Four modules are packaged into an aluminum case to form a Model 3 battery pack. The combined complexity of module design and its automated manufacturing process has taken this line longer to ramp than expected... We have redirected our best engineering talent to fine-tune the automated processes and related robotic programming, and we are confident that throughput will increase substantially in upcoming weeks and ultimately be capable of production rates significantly greater than the original specification.

Musk also hinted at issues with a sub-contractor on the battery assembly line causing problems. He claimed a "sub-contractor really dropped the ball, and we didn’t realize the ball was dropped until quite recently… We had to rewrite the software [for a battery assembly area] from scratch."

Tesla declined to predict when all the bottlenecks would be smoothed out, but the shareholder letter noted that by "late Q1 2018" it hoped to be producing 5,000 Model 3 vehicles per week. Musk did seem to dismiss the Model 3's stumble-start in the call, as well. "The Model 3 is a ten-year program. A few months out of ten years is... immaterial," the CEO said.

As for Musk's Model 3 "production hell," a caller asked him to rate where Tesla is on a scale of 1 to 10.

"We were in level 9, now we’re at level 8, and I think we’re close to exiting level 8," Musk said. "I had hoped we would be at level 7 by now."

Beyond Model 3

In mid-October, The Wall Street Journal reported that Tesla had reached a deal to open a factory in Shanghai’s Free Trade Zone. The company would still be required to pay 25-percent import tariffs on cars sold in China, but a Shanghai factory could curry favor with the Chinese government and would open up China’s supply chain to the company.

Musk seemed to confirm this news on the call but noted that any capital spending on a factory wouldn't come until 2019. "Don’t set your watch by this, but it’s sort of a rough target of production in the next three years," Musk said of a factory in China. "And it would be serving the China market," he clarified, noting that the factory would probably only make Model S and as-yet-unannounced Model Y vehicles. "It’s really the only way to make the cars affordable in China… but it’s three years out," Musk said.

Musk also criticized recent news articles reporting that Tesla had fired hundreds of workers , which anonymous sources suggested were union-leaning. Reports said that between 400 and 700 employees in the 33,000-person company were laid off after performance reviews. “A journalist who wrote stories like this should be ashamed of themselves for lacking journalistic integrity," Musk said, noting that "only 2 percent of people didn’t make the grade." (Editor's note: a highly visible startup firing hundreds of workers in the middle of widely reported production issues certainly has news value.)

Musk also briefly touched on where Tesla is with respect to autopilot. In September, reports surfaced that Tesla would build its own custom AI chips, snubbing Nvidia for a partnership with AMD. Today, Musk said on the company's earnings call that Tesla would be able to achieve full autonomy, but regulatory demands might make a hardware upgrade necessary. "It’s not just full autonomy, but full autonomy with what degree of certainty," Musk said. "Regulators may require some significant margin above [a level of safety]… but I’m confident that we can get to human-level with our current hardware."

The CEO said that there would be an announcement on AI hardware "soon," adding that if a chip upgrade is necessary for a customer who had already purchased Autopilot, Tesla would replace that chip.

Despite drama from Tesla's automotive sector, Tesla Energy seems to be paying off for the company. Battery pack sales (including stationary storage Powerwalls and grid-tied Powerpacks) brought in $317 million in revenue, but the sector only cost the company $237 million. "In Q3, we deployed 110 MWh of energy storage systems, growing 12 percent from the prior quarter and increasing 138 percent year-over-year, driven mainly by increased Powerwall deliveries," the company wrote in its shareholder letter. "To date, we have also installed more than 80 percent of the Powerpacks for the South Australia project; however, revenue will not be recognized until full deployment of the project."

Notably absent from the call was any mention of the Tesla semi, which was supposed to be revealed in September, then in October, and now is tentatively scheduled for November.