Already hammered by manufacturing problems that have severely limited line rates at its Fremont, California assembly plant, Tesla’s Model 3 is being trashed by a key automotive industry analyst after taking the compact battery-electric vehicle for a test drive.
The Model 3 is Tesla’s first entry into the mainstream automotive market and, unlike its earlier models which appeal to affluent buyers with multiple vehicles, the new sedan is going after everyday owners who may have only one vehicle at home. As such, getting quality right is expected to be a critical challenge for the California-based automaker.
“Our inspection revealed widespread shortcomings in fit and finish ,” wrote Bernstein analyst Toni Sacconaghi, after taking the Model 3 for a test drive out of Tesla’s showroom in Brooklyn. “Tesla representatives acknowledged some of the fit issues, but stated that they believed that Model 3 was much further ahead than where Model X and S had been at this point in production.”
Observers might find Tesla’s stand less than comforting. While the basic features of the Model S were enough to win raves from Consumer Reports, the influential magazine subsequently removed the high-line battery-sedan from its Recommended Buy list because of endemic quality issues. CR last month said the Model S was just beginning to show enough improvements to give it a positive rating in the magazine’s annual auto reliability study.
(Consumer Reports hammers Tesla Model X, offers more upbeat assessment of Model S. Click Here for more.)
But the Model X, two years after its launch, was tied with the Cadillac Escalade as the two worst products covered by the study.
In particular, Sacconaghi said he was disappointed in the “relatively poor” fit and finish of the interior of the Model 3 he drove. And while he said Tesla’s defense might be “credible, we can’t help noting that Tesla likely chose to share with us its highest quality/best assembled units, so issues on other cars may be even more pronounced.”
The battery-carmaker launched production of the Model 3 in mid-July, the first time it had started up a new model on time. But that was a largely Pyrrhic victory because of manufacturing problems at the Fremont plant, as well as the new Gigafactory battery plant in Reno, Nevada. Tesla reportedly was able to assemble just 260 of the sedans during the third quarter and production in October was a mere 180, despite intense efforts to resolve what CEO Elon Musk has referred to as “production hell.”
(Can Tesla bounce back from disastrous Model 3 launch? Click Here for more.)
Considering Tesla has a backlog of more than 400,000 advanced reservations – and had hoped to boost Fremont production to 500,000 next year, or six times more than the plant’s 2016 output – such delays could cross into the existential, especially if quality doesn’t come up rapidly.
After being hammered for its larger-than-expected third-quarter losses, Tesla has been struggling to convince investors and analysts that it has things moving in the right direction. A poor review, like Sacconaghi’s, clearly doesn’t help, though the Model 3 has won more positive assessments from some other analysts – many of whom live in New York and likely spend most of their time on the road inside a yellow cab.
Model 3 production issues aren’t Tesla’s only problems. A rapid cash burn has many observers wondering if it will need to raise more capital – especially after the maker’s CFO said Tesla won’t immediately invest in the machinery needed to bring the Fremont plant to full capacity.
Tesla’s shares have always ridden a rollercoaster, but they’ve taken a thrashing in recent months, falling 20% since mid-September. Nonetheless, they’re up about 40% for the year-to-date. TSLA shares were flat on Friday, closing at $302.99.
(For more on Tesla’s poor Q3 earnings, Click Here.)