Tesla Model X Off to a Slow Start: Production Process to Steady Only in 2016

Tesla Motors’ most recent offering, the all-electric crossover Model X, has got off to a slow start in production. The manufacturing process is expected to reach a steady state only in the first quarter of 2016, reported the company.

Tesla also did not confirm the number of vehicles already built and dispatched to owners till date.

tesla-model-x-concept

Elon Musk, the CEO of Tesla, said that there are no fundamental faults in the production line. There are only small things such as seal placement on the vehicle to be taken care of. The CEO was confident that the company would be able to reach production levels of several hundred vehicles per week by the end of 2015.

Tesla reported a loss of $229.90 million in the third quarter, primarily driven by heavy expenditure incurred to ramp up the production of Model X and also to build its Gigafactory battery facility near Reno. The $229.90 million loss is more than thrice the $74.7 million loss reported during the same period last year.

During the reporting of its third quarter results, Tesla also gave production numbers for both Model S and Model X. The company reported that by this year end, it will deliver 50,000-52,000 vehicles which are the lower end of the earlier forecast of 50,000-55,000 vehicles. The company also admitted that hitches in the supply chain are slowing down the production of Model X. To partly overcome this problem, it has decided to manufacture the second-row seats on its own instead of depending on suppliers.

The CEO told Wall Street analysts that production can only be ‘as fast as the slowest parts’. So, he said, even when 99% of the vehicle is ready, less than 1% of the parts are still not and hence the slowing down in the completion of the production process of the vehicle.

Tesla Model X Sun Visor Design

While many analysts are casting doubts on whether the company can meet delivery targets in 2015, some are even concerned about whether such complex parts like the ‘falcon wings’ of Model X can be built at all by Tesla to match commercial numbers. Reportedly a mere handful of vehicles have been delivered till date.

Analysts are talking about concerns regarding the ‘mystery’ shrouding the entire production numbers and processes. Senior analysts opine that unless production is ramped up to thousands in every quarter and positive gross margins are shown, investors will not be able to see Model X as a ‘real product’. Since the CEO handed over the first few numbers of Model X to its owners, the share prices of Tesla have dropped 15.5%.

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