Tesla Model 3 production could be in jeopardy as analysts reveal production isn't up to scratch

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Tesla Model 3 production could be in jeopardy as analysts reveal production isn't up to scratch

Tesla barely managed to produce 5,000 Model 3's in a week, and UBS discovers they're costing Tesla more than they sell for.

Telsa Model 3 production appears to be in trouble as documents reveal how the electric vehicle manufacturer is struggling to assemble 5,000 Model 3 units per week. The news comes right alongside a report from analyst firm UBS' findings around the feasibility of long-term Model 3 production.

UBS analyst Colin Langan said of the firm's findings that he doesn't believe the company will ever make money at the $US35,000 price point the Model 3 is listed for. "This car needs to sell in the low $US40,000's to break even, and I think they're a long way from the 25% growth margin target unless they can sell it well over $50,000," Langan said to CNBC

After hiring a team of engineers to deconstruct a Model 3 alongside a BMW i3 and a Chevy Bolt, UBS's analyst team were flabbergasted by what they found. Driving the Model 3 was "next-gen, military-grade tech that's years ahead of peers" that, while lovely for owners to have, costs far more than it's worth. Langan estimates that each car will lose around $US6,000 if sold at its original intended price point.

Tesla hasn't yet sold a Model 3 at its intended asking price, instead focusing on more expensive models to provide better profit margins. The cheapest Tesla Model 3 available right now is $US49,000 but buyers can add extras to drive the price up to as much as $US80,000.

The biggest worry is that, even with the more expensive models, Tesla can't meet production targets. Since launch, the Model 3's production has been blighted with issues and if it can't mass-produce cars that actually make a profit, it'll never be able to scale production to a point where it can affordably build low-priced electric vehicles.

To make matters worse, Model 3 production took another hit this week as internal documents obtained by Business Insider revealed that 4,300 of the 5,000 Model 3 units produced in the last week of June had to be reworked. That means that only 14% of Model 3 cars coming off Tesla's production line were deemed ready to ship to customers. For comparison, a standard auto manufacturer hits around 80% or more.

The report also outlined how the average repair time for Model 3 needing to be reworked was 37 minutes. That equates to an extra 2,651 hours of labour to produce 5,000 cars. It's unknown exactly how many people work on the Model 3 production line, but that's a lot of overtime to fix some issues that should have been picked up during initial production runs.

In Tesla's defence, the company states that the 14% figure is somewhat misleading as many of the issues were relatively minor that had no bearing on issues like passenger safety.

“In order to ensure the highest quality, we review every vehicle for even the smallest refinement before it leaves the factory,” Tesla said. “Dedicated inspection teams track every car throughout every shop in the assembly line, and every vehicle is then subjected to an additional quality-control process towards the end of the line. And all of this happens before a vehicle leaves the factory and is delivered to a customer.”

Regardless of just what issues resulted in 4,300 cars needing to be reworked, it's a sign that the company is still struggling to make the Model 3 a reality. Combined with UBS' report, it could be a long time yet until we see a truly affordable Tesla hit our roads – especially one that's being produced en masse.

Copyright © Alphr, Dennis Publishing
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