Tesla Model 3 delays: production halted to fix bottleneck

Tesla Model 3 production was halted in the last week of February to allow the company time to fix automation issues and address bottlenecks.

The car maker said the production freeze, which took place from the 20 to 24 February, would now enable it to ramp up production to 2500 cars per week by the end of March.

Prior to the production halt, Tesla employees were said to be making batteries by hand in a bid to face growing a demand backlog. An unnamed inside source told CNBC that Tesla had been "borrowing" workers from Panasonic, with which it is partenered, to speed up production. They said quality control workers were also not experienced enough to ensure the job was done well enough.

But a Tesla spokesman responded by stating that the company had expected some parts of the production process to require "manual" work at that stage. "This is something Elon Musk [CEO] and Jeffrey Brian Straubel [CTO] discussed extensively on our Q3 earnings call, and it has no impact on the quality or safety of the batteries we're producing," they said.

The firm admitted it was working to clear production ‘bottlenecks’ for the Model 3 as early as late last year. In the third quarter of 2017, 220 Model 3s were delivered, compared with Tesla’s prediction of 1500 stated in its second quarter report.

Tesla reassured stakeholders: “There are no fundamental issues with the Model 3 production or supply chain. We understand what needs to be fixed and we are confident of addressing the manufacturing bottleneck issues in the near term.” 

The California firm delivered 1550 of its Model 3 cars to customers in the final three months of last year, short of the 4100 expected by most industry analysts. The firm's latest target to produce 2500 Model 3 per week by the end of the first quarter of 2018 is half its original target, which was to build 5000 cars per week. Tesla says it will reach 5000 models per week by the end of the second quarter. 

Analysis: Will the Model 3 make or break Tesla?

Despite the pushback in production for the entry-level model, for which Tesla received more than 400,000 orders in the month following its reveal, company CEO Elon Musk has remained calm in his statements and stated that issues are quickly being ironed out.

The car is due to arrive in the UK early next year, although Tesla is yet to confirm whether the production setbacks will affect the delivery time of UK-bound vehicles.

Tesla delivered 29,870 cars in the fourth quarter of 2017, including 15,200 Model S and 13,120 Model X. That is broadly in line with industry expectations that the firm would deliver 30,000 cars.