In its third-quarter sales report, Tesla said it built 260 Model 3s, a number "less than anticipated due to production bottlenecks." The automaker had targeted output of 1,500 cars in the third quarter, with production of 20,000 vehicles per month by December. By sometime next year, Tesla expects to build 10,000 vehicles a week.
"We are deep in production hell," Musk tweeted after announcing that the unveiling of a Tesla semitruck would be delayed to November so the company could focus on the bottlenecks.
A spokesman for Tesla issued a statement saying that the Model 3 is being built on a fully installed production line that is increasing in automation.
"As we've always acknowledged, it will take time to fine-tune the line for higher volumes, but as we have also said, there are no fundamental issues with Model 3 production or its supply chain, and we are confident in addressing the manufacturing bottleneck issues in the near-term," the statement read. "There's a reason it's called production hell."
Tracy said slowed assembly lines do little to prove production is running smoothly because lines perform differently when running at full speed.
"At this point, you would only be running it slow if you were having troubles and you were afraid the welds you were going to make weren't going to be good," Tracy said. "It has to be able to run at rate for acceptance testing."
The types of problems Tesla is dealing with are normally worked out long before the assembly line is expected to be working at capacity, Harbour said.
"This is something a plant typically goes through four to six months in advance of a production launch," Harbour said. "This raises the question: 'Is the expertise there?'"
Mark Platshon, managing director of Icebreaker Ventures, said he sees the slow production ramp-up as a sign Tesla is ensuring that everything is working before it hits the mass market.
"Given the number of new parts, the multilevel supply chain and the new automation at the factory being debugged, I am not surprised by the slow ramp," wrote Platshon, an early Tesla investor, in an email. "They are being careful to get it right before shipping a lot."
No matter the cause for the production delays, Tesla has a tight window to ramp up Model 3 production before luxury competitors such as BMW, Mercedes-Benz and Volvo Cars introduce more electric offerings.
The Model 3 is expected by many industry watchers to bring about Tesla's "iPhone moment," when a new product is shown to have revolutionary potential, as Apple's iPhone had in the mobile phone industry. But the more competitive products become available, the less revolutionary the affordable EV appears.
"The Model 3 ramp could be dragged into the second half of 2018 or even 2019, when the competitive threat will likely become more imminent," wrote Barclays analyst Brian Johnson in a note to investors. "And in the face of increased competition, the 'iPhone moment' appears less certain."
Since July, automakers have been one-upping each other on plans to electrify their lineups. Volvo said it would introduce only electrified vehicles starting in 2019. Jaguar Land Rover said it would offer electrified versions of all of its vehicles by 2020. BMW expects to be able to mass-produce EVs by 2020, offering 12 models by 2025. Mercedes said it will electrify its lineup by 2022.
Detroit also has been turning its attention to electrification. Ford Motor Co. plans to introduce 13 electrified vehicles in the next five years, including a crossover with 300 miles of range. General Motors introduced the Chevrolet Bolt last year, with at least 20 all-electric or hydrogen fuel cell vehicles coming by 2023 — two such vehicles will be introduced in the next 18 months.