A 2018 Tesla Model 3. Picture: REUTERS
A 2018 Tesla Model 3. Picture: REUTERS

San Francisco — Tesla CEO Elon Musk says building 5,000 Model 3s a week by the end of June is "quite likely", as the company’s production lines are now demonstrating the ability to make 3,500 vehicles a week.

"This is the most excruciating, hellish several months I’ve ever had … but I think we’re getting there," Musk said during Tesla’s annual meeting of stockholders in Mountain View, California, on Tuesday.

Separately, the car maker also announced Shanghai as the location of its planned Chinese manufacturing facility — its first gigafactory outside the US.

Musk’s comments came after shareholders re-elected three directors and voted against a proposal to wrest the chairman role from Musk.

That had represented the strongest challenge yet to Musk’s grip on the Silicon Valley electric vehicle maker, which also faces production setbacks and the expectation by many analysts that it will need to raise new cash.

Norway’s $1-trillion wealth fund, Norges Bank Investment Management, said on Wednesday it had backed the move to wrest the role of chairman away from Musk.

Tesla shares rose 1% after hours.

Tesla and its high-profile, tweeting CEO have been under the microscope in recent months after a spate of negative press over vehicle crashes, the company’s cash position and the leadership style of Musk, who has snubbed financial analysts and publicly castigated the media.

Musk choked up after taking the microphone to talk about the company onstage in front of investors.

"At Tesla we build our cars with love," Musk said. "At a lot of other companies, they’re built by marketing or the finance department and there’s no soul. We’re not perfect but we pour our heart and soul into it and we really care."

Tesla has been struggling to ramp up production of its new Model 3 sedan, which is crucial to the company’s long-term profitability.

In April, Tesla said it was making 2,270 vehicles a week, less than half the promised 5,000 a week it said it would meet by the end of June.

Manufacturing bottlenecks have delayed the delivery of vehicles to customers and deferred much-needed revenue as the company continues to spend heavily on Model 3 production fixes, as well as projects in the pipeline.

The company has been engaging in so-called "burst builds", temporary periods of fast-as-possible production that it uses to estimate how many cars it is capable of building over longer periods of time.

Analyst Brian Johnson of Barclays warned investors in March to be wary, however, of brief "burst rates" of Model 3 production that were not sustainable.

Musk has also come under fire for his behaviour during an earnings conference call in May, in which he cut off analysts posing financial queries, rejecting them as "boring, bonehead questions". Shares fell as much as 7% after Musk’s snub, evaporating $2bn from Tesla’s stock market value.

On Tuesday he repeated his assertion that the company was not planning on raising additional debt or equity, without providing a timeframe, and said he expected positive net income and cash flow in the third and fourth quarters.

Musk and another executive told investors that an announcement about a factory in Shanghai would come soon and talks were under way with the Chinese government.

Tesla’s head of worldwide sales, Robin Ren, said: "We are incredibly excited to build the first gigafactory outside the US in China, specifically it is going to be in Shanghai," Ren said.

Discussions with government officials in China had been "really great", Ren said, and more details about the Shanghai plant would be shared "soon".

Musk said that for Tesla to make affordable vehicles, "it is going to be important to localise production to at least a continent level".

Tesla hoped to have pinpointed a spot for a gigafactory in Europe by the end of this year, according to its chief, who said the company ultimately expected to have 10-12 such plants worldwide.

Gigafactories would produce battery packs and cars on site, said Musk.

Tesla’s gigafactory in the US state of Nevada makes batteries for the company’s cars, which are built in northern California.

In May, Tesla set up a Shanghai technology firm.

The move into China comes after that country relaxed ownership rules for foreign car makers.

In May, Musk told employees Tesla was being reorganised to speed up production of Model 3 vehicles — a key to profitability at the fast-growing firm.

"To ensure that Tesla is well prepared for the future, we have been undertaking a thorough reorganisation of our company," the memo obtained by AFP said.

"As part of the reorg, we are flattening the management structure to improve communication, combining functions where sensible and trimming activities that are not vital to the success of our mission."

Corporate governance

Arguing that the sprawling company has become difficult to oversee, one investor proposed splitting the chairman and CEO jobs, both of which Musk holds. Musk owns a 20% stake in the company.

Union-affiliated investment adviser CtW Investment Group had rallied shareholders to reject three Tesla directors it says lack qualifications or independence: investor Antonio Gracias, Tesla’s lead independent director; James Murdoch, the CEO of Twenty-First Century Fox; and sustainable food executive Kimbal Musk, Elon Musk’s brother.

Proxy firms Glass Lewis and Institutional Shareholder Services (ISS) and activist investor CtW Investment Group had supported separating the chairman and CEO roles and mostly opposed the three directors, the only ones up for election in 2018.

Tesla had recommended shareholders leave Musk with both top jobs and argued the directors were qualified.

Shares of Tesla are down nearly 8% from the beginning of the year and down 25% from a year high of $389.61 in September.

Reuters and AFP

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