SAN FRANCISCO: Tesla Inc. is temporarily suspending production of the Model 3 sedan for at least the second time in roughly two months, just after Elon Musk admitted to mistakes that hindered his most important car.
The company informed employees that the pause will last four to five days, Buzzfeed reported Monday. A Tesla spokesman referred back to a statement provided last month, when Bloomberg News first reported that Model 3 production was idled from Feb. 20 to 24. The carmaker said then that it planned periods of downtime at both its vehicle and battery factories to improve automation and address bottlenecks.
The hiatus is another setback for the first model Musk has tried to mass-manufacture. In addition to trying to bring electric vehicles to the mainstream, the chief executive officer had sought to build a competitive advantage over established automakers by installing more robots to quickly produce vehicles. Last week, he acknowledged “excessive” automation at Tesla was a mistake.
“Traditional automakers adjust bottlenecks on the fly during a launch,” Dave Sullivan, an analyst at AutoPacific Inc., said in an email. “This is totally out of the ordinary.”
Tesla employees are expected to use vacation days or stay home without pay during the Model 3 downtime, though a small number may be offered paid work elsewhere at the factory in Fremont, California, Buzzfeed reported.
Factory Tour
The shutdown is taking place a week after Musk gave CBS This Morning a tour of Tesla’s assembly plant and said the company should be able to sustain producing 2,000 Model 3 sedans a week. He said manufacturing issues that had been crimping output were being resolved and that Tesla probably will make three or four times as many of the cars in the second quarter.
Shares of Tesla fell as much as 2.1 percent in early trading Tuesday, extending Monday’s decline of 3 percent, which was the most in a week. China said Tuesday it would remove ownership limits this year for automakers making NEVs, a move that may temper further losses in the stock.
Tesla built 9,766 Model 3 sedans in the first quarter. The company said in an April 3 statement that the process of boosting production and addressing bottlenecks during the first three months of the year included “several short factory shutdowns to upgrade equipment.”
“Shutting down for days on end during ramp is far from normal,” Kristin Dziczek, director of the industry, labor and economics group at the Center for Automotive Research, wrote in an email.
Getting Model 3 output up to speed is crucial to generating revenue after the billions of dollars Tesla has spent to manufacture, recharge, service and repair more cars.
While Musk has said the company will be profitable and cash-flow positive in the third and fourth quarters and won’t need another capital raise this year, analysts are skeptical of those predictions.
“Time is money in automotive manufacturing and Tesla seems to think they have plenty of both,” AutoPacific’s Sullivan said. - Bloomberg
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