Tesla's mass-market Model 3 electric car. Picture: SUPPLIED
Tesla's mass-market Model 3 electric car. Picture: SUPPLIED

Tesla 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 would last four to five days, Buzzfeed reported. A Tesla spokesperson referred to a statement provided in March, when Bloomberg News first reported that Model 3 production was idled from February 20-24. The car maker 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 vehicle makers 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 said in an e-mail. "This is totally out of the ordinary."

Shares of Tesla fell as much as 3% and were down 2.5% to $283.95 as of 9.50am on Tuesday in New York. The stock dropped despite China’s saying overnight that it would lift foreign ownership restrictions on local electric-vehicle ventures, removing a hurdle to the company establishing a manufacturing presence in its second-biggest market.

Losing pay

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, Buzzfeed reported.

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 would probably make three or four times as many of the cars in the second quarter.

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, labour and economics group at the Center for Automotive Research, wrote in an e-mail.

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 sceptical 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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