Tesla paused Model 3 production for a week in February to improve automation.
"Beginning on May 3, 2017 and continuing throughout the class period, [the] defendants misrepresented to investors the then-current state of affairs with respect to whether the company was on track to mass produce the Model 3 in 2017, and whether progress had been made supporting [the] defendants claims that 5,000 Model 3s per week would be produced before the end of 2017", the plaintiffs said, according to The Street. Tesla employs thousands of workers in Fremont where it makes its Model S, Model X and Model 3 vehicles.
Suppliers generally use automakers' production targets to formulate a good guess on how many vehicles will actually be built, based on the individual automaker's capability to execute and consumer demand. "We had this insane, complex network of conveyor belts. and it was not working, so we got rid of that whole thing".
Analyst Max Warburton saw this mea culpa coming. To save time and cost, Tesla made the risky bet to skip a pre-production testing phase for the Model 3 in order to advance straight to production tooling, which is harder to fix if problems arise, as Reuters first reported a year ago.
An unprecedented level of robots used in the Model 3's final assembly, in a break with automotive manufacturing norms, has added complexity and delays, which Musk acknowledged on Friday. "Many have tried it in the past", including Volkswagen AG and General Motors Co., and failed, he wrote.
Tesla is producing about 2,000 of its Model 3 sedans a week
Tesla has already sought this month to play down widespread Wall Street speculation that it would need to return to capital markets this year to raise more funds for the money-losing company as it ramps up production of the Model 3 sedan seen as crucial to its long-term profitability. It is expensive and is statistically inversely correlated to quality.
With a new vehicle model, automakers normally choose parts suppliers two to two-and-a-half years before the start of production. "We believe Tesla may be learning this to its cost". The company burned through $3.4 billion previous year.
Musk went further on Friday in a tweeted response to a story in The Economist, which cited estimates Tesla would need $2.5 billion to $3 billion this year in additional funding. "I would not know what to do if I were in their position".
"With Model 3, either the machine works, or it doesn't, or it's limping along and we get short quite severely on output", Musk said on a November 1 earnings call.
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.