Back to top

Tesla (TSLA) Fails to Meet Production Target of Model 3

Read MoreHide Full Article

Tesla, Inc. (TSLA - Free Report) has fallen short of its third-quarter 2017 production goals of the new Model 3 sedan. During the quarter, the company delivered 220 Model 3s and produced 260, missing the production target of 1,500. This indicates that production has not been as smooth as anticipated.

However, during the quarter ending Sep 30, Tesla delivered 26,150 vehicles, marking a rise of 4.5% year over year and 17.7% sequentially. The rise was due to record deliveries of Model S and Model X during the quarter.

In July, the company started producing Model 3, which is half the starting price of Model S. In its second-quarter earnings results the company had said that it aims at achieving a run rate of 5,000 and 10,000 units per week in 2017 and 2018, respectively.

However, because of this initial target miss, customers have already started doubting if the company will manage to achieve its target in the future.

That said, according to the company, there is no fundamental drawback in the production of supply chain of Model 3. Tesla attributed production bottlenecks for this slow production and is confident of addressing the issue.

Success of this Palo Alto, CA-based company to a great extent will depend on the smooth production and deliveries of Model 3 vehicles. If the production miss continues in future, it will have a damaging effect on the company in the future.

In the last three months, shares of Tesla have underperformed the industry it belongs to. The company’s shares have decreased 3.1%, whereas the industry grew 6.3%.

Tesla currently carries a Zacks Rank #3 (Hold).

A few better-ranked companies in the auto space are Toyota Motor Corporation (TM - Free Report) , Volkswagen AG (VLKAY - Free Report) and Daimler AG (DDAIF - Free Report) . While Toyota sports a Zacks Rank #1 (Strong Buy), Volkswagen and Daimler carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Toyota has an expected long-term earnings growth rate of 7%.

Volkswagen has an expected long-term earnings growth rate of 8.9%.

Daimler has an expected long-term earnings growth rate of 2.8%.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

See This Ticker Free >>

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

Tesla, Inc. (TSLA) - free report >>

Toyota Motor Corporation (TM) - free report >>

Daimler AG (DDAIF) - free report >>

Volkswagen AG (VLKAY) - free report >>

More from Zacks Analyst Blog

You May Like