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Tesla misses production goal of 2,500 Model 3s a week

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Output is ramping up, but the company is under pressure from customers and stockholders to deliver

Photo by James Bareham / The Verge

Tesla officially missed its goal of making 2,500 Model 3 vehicles a week at the end of the first financial quarter of this year, according to numbers announced today by the company. It will start the second quarter making just 2,000 Model 3s per week, but the company says it still believes it can get to a rate of 5,000 Model 3s per week at the midway point of the year.

CEO Elon Musk set these targets for the company late last year after it became apparent that Tesla was going to miss his original goal of making 5,000 Model 3s per week by the end of 2017. Along with being more affordable, the Model 3 represents Tesla’s first attempt at creating a car at mass-market scale. Production of it is eventually supposed to outpace that of the Model S or Model X, which Tesla currently makes at a much higher rate.

In total, Tesla has made 9,766 Model 3s since the beginning of 2018. A sizable chunk of those — 2,020 — came in the final week of the quarter, a figure that backs up recent reports that the company hurried to increase production to meet Musk’s target. Employees who work on the company’s other cars were reportedly asked in a recent internal memo to help increase production of the Model 3, which would help “prove a bunch of haters wrong.”

“Given the issues it has had to date, it is certainly an achievement for Tesla to complete 2,000 cars in a week, more so if they can do it 2 weeks in a row,” Sam Abuelsamid, senior analyst for Navigant Research, told The Verge in an email. “However, at this stage we don’t actually have the necessary evidence to say that they have reached a 2,000/week production rate. That statement can only be made when Tesla is consistently starting assembly of and completing a similar number of cars per week.”

Musk, who is famous for setting (and missing) ambitious deadlines for the companies he runs, reportedly took over Model 3 production in the last week to help keep up the new pace. Tesla’s board and shareholders recently approved a $2.6 billion compensation plan to keep him in charge for the next decade, with the payouts tied to whether or not the company hits a number of milestones that increase its valuation.

Tesla says 8,810 Model 3s have been delivered to customers since the start of the year, which means it is still a long way from fulfilling a preorder list that has around 500,000 customers. But the company claims in today’s announcement that, while some customers are canceling their orders because of the delays, it’s taking on enough new ones to keep the total number of reservations stable.

Tesla has had trouble making the Model 3 because of production bottlenecks that affected its ability to make batteries for the new car at the company’s Gigafactory facility. According to today’s announcement, though, the company thinks those problems are being mitigated. While the current rate of production is behind where Musk wanted it to be, Tesla says it only got here in the first place by “addressing production and supply chain bottlenecks,” and confirmed that it had to briefly shut down its factory to upgrade equipment in order to get to this point.

In a late-night email sent by Musk this past weekend, the CEO told employees that “[i]t has been extremely difficult to pass the 2000 cars per week rate for Model 3, but we are finally there. If things go as planned today, we will comfortably exceed that number over a seven-day period!”

The announcement of Tesla’s Model 3 production rate comes at a time when the company is facing scrutiny on all fronts. Its semi-autonomous Autopilot feature is the focus of a National Transportation Safety Board investigation into a fatal crash that happened last month. The company’s stock experienced its worst month in seven years, and Moody’s downgraded its debt. Tesla also recently announced a voluntary recall of 123,000 early Model S sedans.

While Tesla missed Musk’s target, the addition of the Model 3 to Tesla’s lineup means that the company’s production rate in the first quarter of this year jumped 40 percent from the final quarter of 2017. The company’s stock was up slightly in early trading.