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Tesla Motors Inc (TSLA) CEO: Thankful to be Out of ‘Production Hell’

Tesla Motors Inc (NASDAQ:TSLA)

Tesla Motors Inc CEO – Elon Musk – admitted that the firm was in “production hell” completely in the first half of this year, as it struggled to produce more cars. Musk made the comments during Tesla’s Q2 earnings call on Wednesday.

Tesla Motors Inc (NASDAQ:TSLA)
Tesla Motors Inc Model S factory line 1

Is Tesla done with production issues?

The early Model X cars surveys found an assortment of weaknesses like troubles with opening and closing doors. Tesla even settled a claim with a customer, who owned three Tesla cars, and requested a reimbursement for his Model X under California’s “Lemon Laws” (he now possesses just two cars).

Tesla began shipping its first Model X to customers before the end of last year. But, by the time deliveries started, the car was already months behind schedule. Over the next few months, the firm confronted issues in expanding the Model X production along with guaranteeing quality. To entangle things further, the EV firm was likewise attempting to enhance the production of the Model S at the same time.

Tesla Motors Inc said a portion of issues with making the Model X originated from trying to pack a lot of cutting edge innovation into the early forms of the cars. Musk referred this error as “hubris.”

Musk on Wednesday said the firm had “scrambled out of production hell in June,” and referred the production ramp slope “a lot of hurt.” Musk said he “burned out a few neurons” and had “a lot of mental scar tissue” from solving the production problems.

Fix came only at the of the quarter

Following the Model X design and production issues, Tesla was unsuccessful in matching its shipment forecast for two following quarters. Thus, it had to marginally bring down its shipment guidance for the current year. This year, Tesla now aims to deliver 79,180 cars, down from the 80,000 to 90,000 cars initially forecasted.

In the Q2, Tesla Motors Inc delivered 14,402 cars (9,764 Model S cars and 4,638 Model X cars), well below its expectation of 17,000. The EV firm made 18,345 cars in the quarter, or 18% more from the past quarter. Half of the car produced in the Q2 was in the last four weeks of the quarter, showing that the fixes came generally late, Tesla noted. By the end of the quarter, the production was about 2,000 cars a week, which as per Musk is “entirely steady.”

It is not known for sure, if Model X production issues are over. Musk said Model X suppliers “had generally gotten their shit together,” however, he said he would visit a supplier soon to address an anonymous concern.

On Wednesday, Tesla shares closed down 0.62% at $225.79. Year to date, the stock is down over 5% while in the last one-year, it is down over 15%. The stock has a 52-week high of $271.57 and a 52-week low of $141.05.

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Aman is MBA (Finance) with an experience on both marketing and Finance side. He has work as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, playing PC games and cricket.