NEW YORK: Shares of Tesla reversed course to trade down four per cent yesterday after Wall Street analysts questioned the electric carmaker’s ability to maintain an increase in production that helped it meet a long-elusive target of making 5,000 Model 3 vehicles per week.
Tesla’s heavily-shorted shares rose as much as 6.4pc to $364.78 in early trading, after it reported producing 5,031 Model 3 cars in the last seven days of the second quarter. But the stock sank after several analysts questioned whether Tesla would be able to sustain the Model 3 production momentum, which is crucial for the long-term financial health of the company.
“In the interim, we do not see this production rate as operationally or financially sustainable,” said CFRA analyst Efraim Levy. “However, over time, we expect the manufacturing rate to become sustainable and even rise.”
Levy cut CFRA’s rating on Tesla stock to “sell” from “hold.”
Tesla, which chief executive Elon Musk hailed on Sunday as having become a “real car company,” said it now expects to boost production to 6,000 Model 3s per week by late August, signalling confidence about resolving technical and assembly issues that have plagued the company for months.
Tesla also reaffirmed a positive cash flow and profit forecast for the year. Musk had first said in April that the company will be profitable in the third and fourth quarters of this year and will not have to raise any money.
However, it has been burning through cash to produce the Model 3, and delays have also potentially compromised Tesla’s position in the electric car market as a host of competitors prepare to launch rival vehicles.
Production of the mass-market Model 3 sedan has been hampered by several issues, including problems with an over-reliance on automation on its assembly lines, battery issues and other bottlenecks.
To meet its goal, Tesla had set up a new production line inside a tent on the campus of its Fremont factory.