Tesla Cuts Model 3 Orders From Core Supplier By 40%

Tyler Durden's picture

Just days after the Shanghai government was stunned to read in the WSJ that it had granted Tesla permission to open a new gigafactory in its free-trade zone (turns out the two are only in the negotiations stage), according to Taiwanese media reports one of Tesla’s largest suppliers in the country has been instructed to pare back production on parts for the Tesla Model 3 – the latest sign that the cash-burning Silicon Valley carmaker is going to miss its goal of producing 5,000 cars a week by December.

Hota Industrial Manufacturing Co, a Taiwanese automotive components maker and long-time Tesla supplier, has been told to dial back its production of Model 3 components from 5,000 units per week in December to 3,000 per week – a 40% drop, Taiwan’s Economic Daily reports and adds that Hota Chairman Shen Kuo-jung said that the company has received a notice from Tesla to reduce its December order quantity due to production “bottlenecks.”

Hota, which has supplied parts for Tesla’s Model S and Model X, began supplying components, including gears, for the Model 3 in May of this year. Though December orders have been cut back by 40%, Hota indicates that the company is committed to meeting the needs of Tesla’s upcoming production ramp and is scheduled to ship 10,000 parts in May or June, timing that was pushed back from an original March date.

The news follows a handful of embarrassing reports earlier this month, including the revelation that problems with the company’s assembly line had forced employees at Tesla’s Fremont factory to assemble cars by hand, which explains why the company delivered only a fraction of the 1,500 Model 3 Sedans it had promised to deliver by the end of the third quarter.

Tesla, which is set to provide a clearer picture of sales and production delays when it reports earnings on Nov. 1, also suffered another major setback earlier this week when Mercedes beat Tesla to the punch and revealed its E-Fuso Vision One electric semi-truck prototype just weeks before Tesla was set to reveal its own electric semi-truck. Elon had been forced to delay the unveiling because of the Model 3’s “production hell”, something he reiterated yesterday when he qualified it as "8th circle" of hell.

Adding insult to injury, Bloomberg published a lengthy feature this week criticizing Musk’s galling tendency to over-promise and under-deliver, citing the company’s ongoing struggle to complete an upgrade of its “Autopilot” systems to allow for fully autonomous driving. Tesla began selling the software more than a year ago at $8,000 a pop – and has so far failed to deliver any significant improvements. Unconvinced by Musk’s efforts to stall, Tesla owners have opted to sue.

The rollout of the Model 3 Sedan, which, priced at $35,000, was supposed to be Tesla’s big foray into mass market vehicles, continues to be plagued by problems. After losing the mantle of “most valuable US automaker” in July, Tesla’s stock has lagged again in recent weeks following the barrage of embarrassing headlines. But how much longer will it take for shareholders to realize that Tesla is floundering as rivals like GM and Daimler continue to outmaneuver Tesla, which famously burned through $13 million a day in the second quarter.

Not helping matters, and perhaps the latest inication that the Tesla hype bubble is finally bursting, Elon Musk's EV company was downgraded to in line from outperform (PT $312 from $330) by Evercore ISI analyst George Galliers, who cited a "more cautious view" on Model 3 production; says at this point, has little insight into how production is running. More details from Bloomberg

  • Cuts Model 3 delivery forecasts for 2017 by 20k units, 2018 by 8k units, 2019 by 10k units and 2020 by 7k units
  • Continues to believe Model 3 is the most important piece of TSLA investment story in coming quarters; says 3Q production was clearly weaker than what TSLA expected, with 260 Model 3s produced vs a targeted "just over 1,500"
  • Best case scenario will be TSLA confirming Model 3 production "S-Curve" hasn’t changed substantially; instead, the curve has simply shifted 6 to 8 weeks out, with a 6 week delay inferring potential production of 10k units this year
  • However, suspects TSLA won’t have 100% visibility on the ramp until they hit >1k units per week, which, based off the "S-Curve" will only be reached towards the end of Nov.

Finally, as reported over the past week, amid its hellish production delays it was revealed that – following a veritable exodus of executives this year – Tesla had decided to lay off 700 factory workers to try and stanch a unionization effort. It’s now hoping to replace those workers with cheaper, contract workers. However, given these most recent news, the timing seems quite opportune...

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svayambhu108's picture

First blow AI gave to Musk for warning the world /s

jcaz's picture

"Business is so great that we're cutting production 40%"-  classic Musk-speak.....

SoDamnMad's picture

And we are cutting back people citing poor performance reviews that don't exist.  I wouldn't touch a Tesla if you gave it to me. 

bamawatson's picture

TAIWANESE TESLA; self bangkok

MisterMousePotato's picture

TSLA really (as in actually, truly, in fact, etc.) is going to sell 450 of these things EVERY SINGLE DAY for a year? Three years?

Who is buying them?


Isn't life difficult enough already?

charlewar's picture

elon laughs at suckers....oops, investors that fund his folly.

gatorengineer's picture

Watch, the US giverment will continue to subsidize Musk.  Thats what happens when you are a chosenite.

TheRedScourge's picture

He's Dutch South African actually, and the subsidies have been gradually reduced for years to almost nothing now, only the state of California subsidizes them now I believe.

OccamsCrazor's picture


The company WILL NEVER be making 5000 Model 3's per week, ever.  Its such a pipe dream, that MUSK is vaping heavily now in the hopes he will die in his production hell, before everyone sues him silly. 

lester1's picture

Tesla is a prime example of mal investment due to artificially low interest rates from the Federal Reserve. 

I'm still shocked Elon Musk gets US taxpayer money to lay off American workers and build new factories in China.

gatorengineer's picture

hopefully there was a /sarc in there about the surprise

Moe Hamhead's picture

"upcoming production ramp"! Didn't Evil Knievel try that ramp thing once?

RafterManFMJ's picture

It is shocking. Gets me charged up.

massbytes's picture

He employes 35K Americian workers.  Are you a Russian troll, or just clueless?  Sometimes workers get let go for performance.  Get over it.

Offthebeach's picture

In my work, resdential construction,  I must have 10 government agencies subsidising, promoting and 10 penalizing and retarding housing.  Sometimes with in the same agency.


FX223's picture

Unsustainable fantasy dreamland meet reality.

gatorengineer's picture

Hyperloop is the next musk con.  He is just winding down one con, and moving it into another...

helloimjohnnycat's picture

Hyperloop riders :

That giant sucking sound will be the last thing they hear.

Any crack or void in the conveyance pod ( possibly a faulty weld domino-ing ? ) will result in passengers sucked into musk, I mean mush. 

Bring it on, Suckahs !!!!!   lmao









paint it red call it hell's picture

If a economic hickup hits and/or gubermunt subsidies are cut, tesla goes the route of bricklin.

Calculus99's picture

I can hear the sniggering from Detroit and I'm in England...

Juggernaut x2's picture

Detroit shouldn't laugh at anyone- their cars and trucks are all total shit. 

bamawatson's picture

plastic shit; plastic bullshit full of electronic garbage; unsafe plastic pieces of shit loaded with mindless juvenile electronic diversions; crap

Moe Howard's picture

Running out of warehouse space to store the parts is my guess.

When is this waste of taxpayer money going to go bust?

Soon would be my guess.

TheRedScourge's picture

Production delays. Delays which will be resolved in a few months. Despite questionable accounting practices, Tesla has managed to "fake it til they make it". They've got all the bond and stock money they're going to need to reach sustainable profitability now. And once they ramp up the Model 3 production, and then drive down battery costs with the Gigafactory, this is the car that they're going to earn it on.


I wouldn't buy their stock though, it's massively overpriced by hype investors.

mr1963's picture

Trump's pulling this funding -- bet on it -- it's simply Musk getting ready for it.

TheRedScourge's picture

Sorry but the funding has been pulled already years ago. Only the state of California continues to fund them with ZEV credits, but that's running out next year.

E.F. Mutton's picture

So, up 10% on any news per usual?

wmbz's picture

Looks like 'Ol Musky hasn't been able to get any 'free" money from Trump, like he was getting from his butt buddy Obozo.

E.F. Mutton's picture

Trump - "You have yet to make a profit"

Musk - "What? Parfait? Parrot? I don't understand, speak English, Man"

buzzsaw99's picture

elon drinks your milkshake.

JoeTurner's picture

All the talk of tax reform in DC probably has Musk spooked given that all his businesses are glorified tax skimming scams...


TheRedScourge's picture

Feds haven't given Tesla money for years. Their ZEV credits from the state of California run out when they produce their 500,000th car, which should be in a quarter or two.

ultrasonic's picture

Who cares if the stock goes up? The titans of the car industry are now tripping over themselves to compete against an American startup. A company which has fought countless battles in many states to disrupt one of the least transparent retail models ever. I can’t think of anything more All American than making the middleman obsolete.

Even if you use an Android phone, you have to give Steven Jobs credit for making the smartphone so ubiquitous.

What are we, effing Neanderthals? Do you really want to be driving a bloody Chevy Bolt in the future?

gatorengineer's picture

How about using products that arent heavily giverment subsidized instead.  I will never own a Goverment Motors vehicle.  If you think apple, micrcrap, or google would be around with the out NSA/CIA/DOD money you are kidding yourself.  If Muskie didnt have subsidies he would be hocking fake watches in Brooklyn.

Osmium's picture

Or selling cocaine.


On October 19, 1982, the automaker John Z. DeLorean is arrested and charged with conspiracy to obtain and distribute 55 pounds of cocaine

bamawatson's picture

"this is better than gold"

ultrasonic's picture

I hope you are being ironic- you likely used one of those companies’ products to post your comment.

buzzsaw99's picture

I can’t think of anything more All American than making the...

I can, and musk is doing it, by siphoning billions from the pension funds via a ponzi corporation.

Reverend you have ballz as big as church bells. [/Jerry Caesar]

Arrow4Truth's picture

"Titans of the car industry are now tripping over themselves to compete"... and winning. They at least have a model resembling value add. Steve Jobs - credit... sure, but I don't operate on credit, and have never owned a so-called "Smart phone". What fucking difference does it make which convenyance I select for personal use? I'm fine with my '97 F250 with the dent on the fender. The true answer... it doesn't. Gotta go see a man about a horse. 

ultrasonic's picture

Well and fine for you. But the rest of the world is moving on whether you like it or not. Don’t penalise your kids with a third world future just because you like the black smoke coming from your truck.

vaporland's picture

wow - you got such hate for this post - then again the tesla-musk haters on ZH let their ideology blind their common sense.

if I was betting long term, I'd choose Musk's wily machinations over Stuttgart's hidebound history of conformity.

massbytes's picture

No sh**.  Every Musk story here is met with unbelievable whining and ridiculous statements.  Jealous little foreign trolls, I think.  All of the auto manufacturers are getting incentives for EV's.  I am not a big fan of subsidies, but in this case, it has caused a very big, very good change to the world.  Oh, and I don't own the stock.  Wish I would have earlier.

_SILENCER's picture

Teslas are fun to drive.

But I wouldn't want to be sitting in that EM field for hours on end.

Or buy his US subsidized douche wagons filled with China-made goods.

Then again, I give Germans money for cars, and they allowed themselves to be overrun by Muslim pig-dogs.



TheRedScourge's picture

There's not an EM field in a Tesla car, just an Electric Motor, like one you might in your vacuum cleaner. You're more at risk from cellphone and wifi signals, which are beaming at you all day long no matter where you are, and even the risk they pose is dubious at best, at least now that we've massively reduced the power levels involved from where they were in the 80s and 90s.

Shibumi2's picture

So MUSK already announced production bottlenecks...of course suppliers deliveries would be rescheduled...duh

How is this news?

Am I the only one on ZH that ran an automotive biz?

roadhazard's picture

The only opinion that counts is the guy who has a car on order. The rest of you just like whining.