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Home / Business

Investors braced for a shock as Tesla reveals latest figures for its electric cars

By James Titcomb
Daily Telegraph UK·
1 Apr, 2018 02:19 AM4 mins to read

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Tesla has suffered damaging production delays as it attempts to meet promises on the Model 3. Photo / AP

Tesla has suffered damaging production delays as it attempts to meet promises on the Model 3. Photo / AP

The Easter weekend was set to start late for many of the Tesla employees at its factory in Fremont, California.

The electric car company has suffered damaging production delays as it attempts to meet promises on the Model 3, its new mass-market vehicle, and every spare minute was expected to be used up as it approached the end of what could be a make-or-break few months.

On Tuesday, Tesla is expected to reveal how many Model 3s it delivered to customers in the first quarter of the year.

Investors, who have seen shares in Elon Musk's company fall by a quarter in the last month, will be braced for bad news.

Just how bad, only Musk and his peers know at present.

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But internal emails leaked last week revealed the extent of the company's production hell as it approaches its crucial deadline.

According to one memo obtained by Bloomberg, Peter Hochholdinger, the company's head of production, asked workers who had been assigned to manufacturing other cars to switch to the Model 3 on Thursday, Friday and Saturday in a last-minute attempt to boost production.

Doug Field, another executive, demanded that Tesla employees "prove a bunch of haters wrong".

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Tesla and Musk are known for overly-ambitious deadlines, so much so that they are seen as a quirky personality trait more than a sign of ill-discipline.

But the consequences of missing them now seem more serious.

The US$35,000 ($48,342) Model 3, the first of which was delivered last August, is the centrepiece of Tesla's strategy to bring electric cars to the masses, and the reason the company hit a valuation of over US$60 billion last year that saw it surpass both Ford and General Motors.

There has been no shortage of demand for the Model 3. More than half a million are believed to have been ordered.

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The problem is making enough of them. By this point, the company originally believed it would be making 5,000 Model 3s a week. In January this slipped to 2,500 a week, a target it stuck to as recently as February. It now seems certain to miss that target.

In his email to staff last month, Field said 300 a day - a figure that would still undershoot the target - would be an "incredible victory".

On Friday, analysts at Deutsche Bank said that it expects Model 3 deliveries at the end of the quarter to be at just 1,100 a week.

"Tesla has not been averse to defying industry convention and taking on significant risks. But they are also clearly struggling... with remarkably low output and disappointing quality," the analysts said.

Compounding the company's pressures, Moody's last week cut Tesla's credit rating and issued a "negative" outlook.

It not only cited slow production, but the billions it is burning in cash, which Moody's said would potentially mean the company has to raise more money in the second half of next year.

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Separate safety fears also contributed to the company's share price dropping last week. It emerged that the US National Transportation Safety Board had opened a probe into a fatal crash involving a Tesla Model X in California the week before.

Late on Friday Tesla confirmed its driving-assistance system, Autopilot, had been engaged at the time, forcing Tesla to defend the technology, saying it reduced crash rates by 40 per cent.

It said people used the Autopilot software on the stretch of road where the crash occurred 200 times per day without an accident.

Confidence in the company was also knocked by chipmaker Nvidia suspending tests of its own driverless car technology, since Tesla cars partially rely on Nvidia chips for their own autonomous features.

Earlier this month, Tesla shareholders approved a mammoth compensation plan for Musk that could see him earn US$70b if its valuation reaches US$650b - more than 14 times what it is today - in a decade.

Musk will have to do a lot more than meet deadlines to get there, but on current form doing that would count as a victory.

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This story first appeared in the Daily Telegraph and was reproduced was their permission

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