Tesla raises production but falls short of Model 3 goals

Electric carmaker Tesla Inc increased production of its Model 3 mass-market car in the first quarter but still fell far short of the numbers it promised last summer.

The Palo Alto, California, company says it made just under 9,800 Model 3s from January through March. That's four times what it made in the fourth quarter. But it's still only a fraction of the 20,000 per month that CEO Elon Musk promised when Tesla first started making the car.

Tesla says it made just under 35,000 vehicles total in the quarter, including the Models S and X. That's a 40 per cent increase from last year's fourth quarter.

The company predicted that Model 3 production will climb rapidly through the second quarter and reach about 5,000 vehicles per week around early June. Tesla predicted high sales volume, good gross profit margins and strong cash flow. "As a result Tesla does not require an equity or debt raise this year, apart from standard credit lines," the company said in a regulatory filing.

The Model 3, with a starting price of around US$35,000, is the car that's most important to Tesla's future. Tesla said it doubled the weekly production rate of the Model 3 last quarter by addressing production and parts supply bottlenecks, including several short factory shutdowns to upgrade equipment.

The company said it delivered 29,980 vehicles during the quarter.

Late in March, Moody's Investor Service downgraded Tesla's corporate debt further into junk status. Unsecured notes are now "subject to very high credit risk."

The agency said future ratings will depend on whether Tesla can meet Model 3 production targets. Moody's also wrote in a note that Tesla likely will need to raise capital soon. Its liquidity isn't enough to cover US$3.7 billion it needs for operations, capital expenses and convertible debt maturities through early 2019.

AP