Tesla Model 3 production bottlenecks are due to suppliers, says Oppenheimer after meeting with management

A lot of eyes are on Tesla’s Model 3 production ramp up, especially following a production of only 260 Model 3 vehicles during the third quarter and some misleading media reports.

Now Oppenheimer is adding its insights into the situation after having met with Tesla’s management. 

Oppenheimer analyst Colin Rusch said that he met with Tesla last week, along with other investors, and he wrote in a note to clients today (via Barron’s):

“Tesla indicated that all the production equipment for Model 3 was installed and working and that all vehicles were moving through the manufacturing line. We understand the delayed ramp is due to a small number of suppliers failing to deliver on time.”

He added that “at least one of those suppliers has been fired and replaced by insourcing.”

Tesla CEO Elon Musk had warned that the automaker’s supply program for Model 3 would be highly competitive due to the high volumes they are aiming for over a short timeline.

He said that suppliers will be held to high standards and deadlines or otherwise they could be fired – adding that “if you can make a human in 9 months, you can make a tool in 9 months,” in reference to the Model 3 production timeline.

Beyond Oppenheirmer’s example, we reported earlier this year that Model 3 supplier SHW was stung by a $100 million parts cancellation.

Musk also tried to shed some light on the Model 3 production by sharing some images of the production line earlier this month he reiterated that they are still in “production hell”, but he is nonetheless still confident that the production rate will significantly increase throughout the current quarter and Tesla didn’t update its customer delivery timeline.

Tesla is still delivering more vehicles to company insiders and employees, but the first regular customer deliveries are planned for “late October.”

Rusch places Tesla’s total Model 3 deliveries at 3,005 units this year. Considering Tesla delivered just over 200 Model 3 vehicles during the third quarter, it would mean about 2,800 Model 3 deliveries during the current quarter. The company didn’t release delivery guidance, but it is aiming for the production of 5,000 vehicles per week in December.

Oppenheimer analyst Colin Rusch is ranked #773 out of 4,697 Analysts on TipRanks with a success rate of 53% and an average return of 7.3%. Here’s his rating history on TLSA: