Shares of Tesla (TSLA) dropped in premarket trading after the company was downgraded by an analyst due to a more cautious view on Model 3 production. Following reports that Tesla is planning to cut Model 3 parts orders from a Taiwanese parts supplier, another analyst trimmed his estimates on Tesla.
CUTTING MODEL 3 PARTS ORDERS: Tesla is planning to cut its orders for parts for the Model 3 sedan from Hota Industrial, a Taiwanese auto component maker and long-time Tesla supplier, by 40% due to a “bottleneck” in Model 3 production, Reuters reported this morning, citing a report from the Economic Daily News. According to Hota Chairman Seh Kuo-jung, Tesla told Hota that orders would be cut to 3,000 sets per week from 5,000 sets beginning in December. Additionally, Tesla may also delay scheduled weekly shipments of 10,000 parts in March by a few weeks until May or June. Hota makes gears and axles for vehicles.
BOTTLENECK BACKGROUND: Tesla has said bottlenecks had left the company behind its planned ramp up for the Model 3, which began production in July. After reporting third quarter production and deliveries, Tesla said that there are “no fundamental issues with the Model 3 production or supply chain,” adding that it “understands what needs to be fixed and is confident of addressing the manufacturing bottleneck” in the near-term. Elements of Tesla’s Model 3 body line are “still in development” at Thai Summit America, a Michigan-based supplier, but were not yet installed at Tesla’s plant in Fremont, a source told Daily Kanban on October 5. In July, Tesla CEO Elon Musk told employees that “Frankly, we’re going to be in production hell” for the Model 3 “for at least 6 months, maybe longer.” Musk previously tweeted that he sees the company producing 20,000 Model 3 cars per month in December. As a result of the Model 3 bottlenecks, Tesla has delayed the unveiling of its all-electric semi truck to November 16 from October 26.
