Tesla admitted on Tuesday that the design of its new Model 3 has not been finalized yet, but it anticipates starting building the long-awaited mass-market sedan within the next 18 months. The plans to expand the California factory are still in process, and some aspects of making and procuring parts for the Model 3 are not yet determined, said the electric car maker in its quarterly financial report.
Tesla still finalizing suppliers
In the report filed with the SEC, the automaker said it is “currently evaluating, qualifying and selecting our suppliers.” The automaker has been censured before for missing its production deadlines, including the launch dates for the Model X and Model S, due to supply and quality issues.
Last week on a conference call with analysts, CEO Elon Musk also acknowledged that the Model 3 design is not yet complete and that it will take another six to nine weeks to finalize their engineering decisions. In a phone interview, Brian Johnson, a Barclays analyst, told Reuters that the accelerated production schedule is aggressive.
“Finalizing the design work, and lining up the suppliers and launching in one and a half years seems not possible,” the analyst said.
Tesla has high expectations for its affordable sedan, which has a projected starting price of $35,000 — less than half that of the luxury Model S sedan. With the Model 3, the electric car maker hopes to boost its revenue and production volume and eventually turn to profit.
Lofty production targets
Last week, Musk jolted investors with the news that he is planning to expand production at the Fremont plant. Now the target is to build 500,000 vehicles in 2018, which is two years ahead of schedule.
Tesla could, however, raise additional funds to finance the accelerated production through the 325,000 Model 3 reservations, which are accompanied by a refundable $1,000 deposit for each reservation. The SEC filing showed that in the first quarter, the automaker appeared to be conserving cash as it was struggling to cope with early quality problems on the Model X and parts shortages.
Even as the electric car maker reduced capital spending nearly in half, free cash flow dipped to -$466 million with an operating loss of $248 million. Later this year, Tesla is expected to hike capital spending and spend more than $2 billion in the next three quarters, according to the filing. This $2 billion includes $500 million to start production of vehicle battery cells at its Reno, Nevada plant by the end of the year.
On Tuesday, Tesla shares closed down 0.11% at $208.69. Year to date, the stock is down by over 12%, while in the last year, it is down almost 12%.