The Fresh York Times

July Trio, 2017

Tesla’s long-awaited mass-market electrified car will begin rolling off the assembly line this week. But even as it moves ahead, the automaker is encountering challenges to its ambitious plans for growth.

On Monday, it acknowledged that it had experienced a “severe shortfall” in production of 100-kilowatt battery packs that use fresh technologies and are made on fresh assembly lines.

As a result, Tesla’s output of 25,708 cars in the 2nd quarter scarcely exceeded its first-quarter production, however it was a forty percent increase from a year ago.

Until June, the supply of battery packs was about forty percent below request, Tesla said, tho’ supplies improved last month.

The hiccup in production appeared to have unsettled investors. Tesla stock fell $8.99, or Two.Five percent, to $352.62.

Tesla said production of its very first midpriced car, the Model Trio, would begin on Friday, two weeks earlier than planned, with the very first deliveries on July 28.

Elon Musk, Tesla’s chief executive, said late Sunday on Twitter that production would increase quickly, with one hundred Model 3s produced in August and 1,500 or more in September. He said that he expected the company to be able to produce 20,000 a month commencing in December.

The Model three is a critical test for Mr. Musk and his ambitious plan to turn Tesla into a producer of mass-market electrical cars.

Until now, the company has manufactured luxury cars in relatively petite numbers, typically selling them for $90,000 or more. In 2016, it made about 85,000 vehicles. General Motors, by contrast, produced more than nine million cars and light trucks.

The Model three will be priced around $35,000. Mr. Musk envisions it reaching a much broader range of customers and has said he expects it to thrust Tesla’s output to 500,000 cars a year in 2018.

In June, Mr. Musk told shareholders that Model three production was set to begin in July at the company’s assembly plant in Fremont, Calif., albeit he stopped brief of telling when the car would be available in volume.

Mr. Musk has said Tesla is working to automate its assembly plant further to increase Model three output. He said at the shareholder meeting that the company was beginning to consider extra assembly plants.

“There is no room at Fremont,” he said. “We are bursting at the seams.”

Tesla has had discussions with Chinese officials about opening a plant near Shanghai. China accounted for about fifteen percent of Tesla’s revenue in 2016.

To prepare for the addition of the Model three to its lineup, Tesla built a thick, $Five billion factory in Nevada to produce batteries for its electrified cars. Tesla has also bolstered its coffers. This year, it raised $1 billion through offerings of stock and debt. A Chinese internet giant, Tencent Holdings, acquired a five percent stake in the company.

The company needs the extra capital because it proceeds to post losses in most quarters. In the very first quarter of this year, Tesla lost $397 million, compared with a loss of $282 million in the period a year earlier, but its revenue more than doubled, to $Two.7 billion.

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