Tesla Inc (NASDAQ:TSLA) 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 Corp (NYSE:TM), Volkswagen AG (OTCMKTS:VLKAY) and Daimler AG (OTCMKTS:DDAIF). 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%.
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