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Tesla Model 3 deliveries lower than expected because of 'production bottlenecks'

  • Of the total, 14,065 were Model S, 11,865 were Model X, and 220 were Model 3.
  • In the quarter, 25,336 vehicles were produced. Of those, 260 were Model 3.
  • Tesla said production bottlenecks caused the number of Model 3 vehicles produced to be lower than anticipated.

Ramping up production of its new Model 3, has been more challenging than Tesla expected. The automaker delivered just 220 of its new entry level electric car in the third quarter, well below what analysts were expecting.

Overall, Tesla delivered 26,130 vehicles in the third quarter, up 4.5 percent from the same time last year.

Of the total, 14,065 were Model S, 11,865 were Model X, and 220 were Model 3.

The company said it expects to deliver about 100,000 Model S and X vehicles in 2017. That would represent a 31 percent increase over last year.

But it's the production and deliveries of the Model 3 that hold the greatest interest for investors, and were sending shares of Tesla down more than 1 percent after the market's close.

This summer, the company said it planned to build 1,500 Model 3 cars in the third quarter, but it fell far short of that goal, hurt by production bottlenecks.

Tesla CEO Elon Musk speaks during the delivery of the first Tesla Model 3 vehicles in Fremont, US, 28 July 2017.
Andrej Sokolow | picture-alliance/dpa | AP
Tesla CEO Elon Musk speaks during the delivery of the first Tesla Model 3 vehicles in Fremont, US, 28 July 2017.

"Although the vast majority of manufacturing subsystems at both our California car plant and our Nevada Gigafactory are able to operate at high rate, a handful have taken longer to activate than expected," the company said in a statement.

"It is important to emphasize that there are no fundamental issues with the Model 3 production or supply chain," Tesla continued. "We understand what needs to be fixed and we are confident of addressing the manufacturing bottleneck issues in the near-term."

Analysts had talked about the possibility of Tesla struggling as it ramped up its assembly line for its newest vehicle.

Ben Kallo, who covers Tesla for Baird, issued a note to investors last week that said, "We believe Q3 will be the most challenging part of the Model 3 production ramp, and although we model 500 Model 3 deliveries, we think TSLA may be several weeks behind and likely missed its Q3 target of approximately 1,500 Model 3's produced."

Tesla delivered its first Model 3 cars in July. The first batch of cars, which start at $35,000, were delivered to Tesla employees.

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