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Can Tesla Fix Model 3 Production Bottlenecks in Time?

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Oct. 10 2017, Updated 8:11 a.m. ET

Production bottlenecks at Tesla

In the previous part of this series, we saw how production bottlenecks slowed Tesla (TSLA) Model 3 production in 3Q17. In general, production bottlenecks are temporary and can be fixed by making some adjustments to the production line to optimize its efficiency. In its 3Q17 vehicle deliveries press release, Tesla said that “there are no fundamental issues with the Model 3 production or supply chain.” According to the company, these production bottlenecks occurred due to unexpectedly delayed activation of “a handful” of subsystems at its plants.

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Note that Tesla’s earlier car models including Model S and Model X were seen as a part of the premium electric car segment due to their high price tags. Model 3 is the company’s first effort to expand its presence to the mass-market electric vehicle segment. In the last few years, other auto giants (IYK) including General Motors (GM), Ford (F), and Fiat Chrysler (FCAU) also have sped up their mass-market electric vehicle development programs.

No supplier issues reported

On July 2, Tesla CEO Elon Musk said in a tweet that Model 3 production is expected to increase exponentially in the coming months and it should reach above 1,500 in September. In 3Q17, Tesla delivered 220 units of Model 3 and produced 260 units. Both these figures were below expectations.

However, this was not the first time that Tesla missed its own deliveries and production rate expectations for newly launched vehicles. Model S and Model X saw supplier-related issues on several occasions.

Generally, supplier issues can’t be fixed internally or as quickly as production bottlenecks can be fixed. Therefore, investors could consider it a relief that Tesla didn’t mention any supply-chain-related issues that hindered Model 3 production in the last quarter.

Continue to the next part to see how Tesla is preparing to deal with Model 3 production bottlenecks.

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