Tesla Q3 Update: Model 3 Is Delayed (Don't Panic)

Nov. 05, 2017 8:37 PM ETTesla, Inc. (TSLA)885 Comments
Yarrow Bouchard profile picture
Yarrow Bouchard


  • Model 3 production is delayed by 3 months.
  • Tesla appears to be innovating in robotics and factory automation, a potential long-term source of durable competitive advantage.
  • Analysts should judge the company based on its fundamentals, not on whether it meets Elon Musk's aggressive timelines.

The Tesla (NASDAQ:TSLA) Model 3 production ramp is delayed 3 months. The company is now expecting to reach a production rate of 5,000 units/week by the end of March 2018. The primary production bottleneck is in battery module assembly at the Gigafactory in Nevada, according to Tesla's Q3 update. More on that below.

CEO Elon Musk also confirmed that Tesla fired 2% of its workforce this year (700 employees out of 33,000 total) based on poor performance. Musk pointed out (as I did a few weeks ago) that this is likely a low rate compared to other companies. Average annual turnover for manufacturing companies is 13%. Only about half of all turnover is voluntary. The firings are a non-story, yet they were widely represented and received as bad news.

This is a reminder to distinguish facts from insinuation, speculation, and rumour and to put facts in their proper context. It's also a warning that analysts and the media do not always accurately represent the truth about Tesla. Be skeptical. Require hard evidence. Go deeper in your research. Keep this in mind, especially with the intense discussion of the Model 3 production ramp. Simply because it gets the most attention, there are more misleading articles on it than any other topic.

Model 3 production ramp is delayed, but not by long

The primary bottleneck for Model 3 production is Zone 1 and Zone 2 of the battery module assembly line at the Gigafactory. As Musk tells it, management discovered late into production that the supplier had botched these two zones. Tesla then had to build them from scratch. This is the primary cause of the 3-month delay. No other bottleneck was cited as a comparable source of concern.

Musk was reluctant to say what the production rate would be at the

This article was written by

Yarrow Bouchard profile picture
I write about autonomous vehicles and other AI robots on Seeking Alpha and in my Substack newsletter. I've been long TSLA since February 2017.

Disclosure: I am/we are long TSLA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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