Tesla halts Model 3 production after Musk says 'excessive automation a mistake'

Ignacio Smith
May 4, 2018

For the second time since February Tesla said Monday it has temporarily suspended production of its Model 3 sedan, a move that analysts say underscores the vast challenges for the company to deliver its first mass market electric vehicle.

Now, Musk has directed the company to suspend Model 3 production for the second time in recent weeks.

Reuters has learned the Silicon Valley company led by Chief Executive Elon Musk is accepting preliminary bids for supplier contracts on the Model Y, a compact crossover companion to the Model 3 sedan.

And for Musk himself, the auto represents the culmination of a plan to supply affordable, widely-available vehicles powered exclusively by electricity.

In the past, Model 3 production was halted in February. The temporary halt will help Tesla "to improve automation and systematically address bottlenecks in order to increase production rates", the company told USA Today.

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Tesla, Inc. designs, develops, manufactures, and sells electric vehicles and energy storage products in the United States, China, Norway, and internationally.

Nonetheless, he was not surprised by the suspension.

Workers on the Model S and X lines were told that they would need to come in for weekend shifts in June. "And when you have something that's mass marketed, it's a different ball game".

The electric-car maker will try to build 6,000 of the sedans a week by the end of June, Musk wrote in an email Tuesday first obtained by the blog Electrek.

Tesla reported net losses of more than US$770 million ($1 billion) in the last three months of past year, up from US$219m during the same time in 2016.

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"Tesla's been trying to run full tilt", said Chaim Siegel, an analyst at Elazar Advisors.

Yet now it is common knowledge that the production of the Model 3 which was in such great demand has been shut down.

Tesla's capacity to meet the rising demand for its Model 3 has been tested to breaking point by now. That would require the company to more than double its current rate.

Musk said he was sleeping at the Model 3 factory so he could get more work done. Musk had directed Tesla to adopt advanced automation as the assembly line for Tesla's new sedan, the Model 3 electric vehicle. For the next 2 quarters, we expect production delays and the specter of a capital raise to dominate investor attention.

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