Tesla said it is temporarily halting production of its Model 3 sedan for four to five days for the second time since February. The company said these periods of downtime are used to improve automation and address bottlenecks in production.
This suspension does not bode well for Tesla as the Model 3 production is important for the company in terms of revenue and cash flow. Tesla is stumbling on its target of producing 2,500 cars per week by the end of the second quarter, partly due to addition of too many robots to its assembly line.
Musk accepted his mistake in relying overly on automation at Tesla through Twitter last week. He also said Tesla would become profitable and cash flow positive in the third and fourth quarters without raising cash, a claim which has raised doubts from analysts who point out that a sharp increase in Model 3 production was crucial for achieving these objectives.
Analysts believe that Tesla will have to raise up to $3 billion within a year to meet cash and debt obligations.
Apart from glitches on the Model 3 assembly line, Tesla is facing allegations on undercounting worker injuries and a lawsuit on misleading investors over Model 3 production. Recently there were speculations on Tesla’s chance of going into bankruptcy. These constant production halts are raising questions on Musk’s ability to fix issues instantly as is required in the automotive world.
Musk said Tesla would become profitable and cash flow positive in the third and fourth quarters without raising cash
Tesla’s stock took a tumble in premarket trading on the news of the temporary production stoppage.
A lot is riding on Tesla’s Model 3 but it appears the company is facing constant roadblocks to keep the production up and running. And this is an issue that requires a fast and permanent fix.
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