How the Tesla Model 3 is turning into a slow-motion catastrophe

Apparently the production of Tesla's Model 3 has become a real nightmare and seems to be way under the expected goals for 2018.

"Production hell," as Elon Musk calls it, has reached a new level of blazing discomfort at Tesla. Last week, the company reported that it had fallen well short of its delivery goals for the Model 3, the $35,000 car that's supposed to transform Tesla from a niche player to the dominant force in the new age of electrified automobiles.

Tesla also pushed back its production plans for the Model 3 by a full quarter — a 5,000-unit weekly run-rate now won't arrive until the end of the second quarter of 2018.

On the bright side, Tesla set a record for 2017 deliveries, selling over 100,000 vehicles for the first time in its 14-year history. And there is a splash of cool water in production hell: fewer 2018 deliveries means that Tesla will tap out a $7,500 federal tax credit later than expected.

When Tesla revealed the Model 3 in early 2016 and almost immediately racked up hundreds of thousands of pre-orders for the car, I worried that the vehicle could do the company in. Demand was impressive — too impressive for an automaker that, with its previous two vehicles, had shown a pattern of extensive delays and quality-control problems. Tesla wasn't yet ready to be a mass-market manufacturer; it had only just gotten its act together as a luxury brand.

Don't get me wrong — the Model 3 looks brilliant, and the off-the-hook desire for the vehicle is completely understandable. But while sales of the Model S and Model X look respectable at this point, not to mention sustainable at that 100,000 level year after year, the Model 3 is turning into a slow-motion catastrophe that's going to push Tesla's capital structure beyond the breaking point.

The math is simple: Tesla is spending as much as General Motors every quarter — about $1 billion — to produce and sell a fraction of the vehicles that GM does. GM is also turning that invested capital into steady profits, while Tesla in the third-quarter of 2017 posted the biggest loss in its history. GM has a $25-billion war chest. Tesla only has enough cash to operate through 2018.

To make matters worse, Tesla is striving and failing to build a pretty simple vehicle. The Model 3 is basically an electric Honda Accord. And Honda without noticeable effort builds and sells over 100,000 of those every single year in the US alone.

Read the rest of the story here: http://www.businessinsider.com/tesla-model-3-problems-threaten-company-future-musks-job-2018-1