UPDATE 1-Tesla sticks with Model 3 production target

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Feb 7 (Reuters) - Tesla Inc said on Wednesday it was sticking with Chief Executive Elon Musk's revised production targets for its Model 3 electric sedan and posted smaller-than-expected quarterly loss.

Shares of the Palo Alto, California-based company were up about 2 percent in extended trading.

Model 3, which starts at $35,000, is seen as crucial to Tesla's ambition of transforming itself into a profitable company.

However, Tesla has struggled to ramp up production of the car due to manufacturing challenges, forcing the company to miss its delivery targets in the past.

"We continue to target weekly Model 3 production rates of 2,500 by the end of (first quarter) and 5,000 by the end of (second quarter)," Tesla said in a statement.

The company said it had $3.37 billion in cash and cash-equivalents as of Dec. 31, compared with $3.53 billion at the end of the third quarter.

Automotive gross margin, which excludes the sale of zero emission vehicle (ZEV) credits, fell to 13.8 percent from 22.2 percent last year. Analysts on average had expected margins of 15.7 percent, according to FactSet.

Net loss widened to $675.4 million, or $4.01 per share, for the fourth quarter ended Dec. 31 from $121.3 million, or 78 cents per share, a year earlier. http://bit.ly/2nKYSTx

Total Revenue rose to $3.29 billion from $2.28 billion.

Excluding items, the company lost $3.04 per share. Analysts were expecting a loss of $3.12 per share, according to Thomson Reuters I/B/E/S. (Reporting by Arjun Panchadar in Bengaluru; Editing by Anil D'Silva)