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Tesla raises production but falls short of Model 3 goals

A Model 3 sits at a Tesla dealership

A Model 3 sits at a Tesla dealership in Chicago on March 30. Credit: Getty Images / Scott Olson

DETROIT — 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 of 2017. 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.

The news, released just before the markets opened Tuesday, pushed Tesla’s shares up nearly 6 percent, to close at  $267.53. Still, they were trading above $320 at the start of the year and have fallen on a string of bad news for the 15-year-old company.

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

But the Model 3, with a starting price of around $35,000, is the car that’s most important to Tesla’s future. It’s the company’s first lower-cost, high-volume car and is crucial to its goal of becoming a profitable, mainstream automaker. Tesla at one point had more than 500,000 potential buyers on the waiting list for the Model 3. But in a statement Tuesday the company conceded that some had canceled, without giving numbers. Tesla said Model 3 reservations “remained stable” through the first quarter.

The cancellations, it said, were “almost entirely due to delays in production in general and delays in availability of certain planned options,” including dual motor all-wheel-drive versions and a smaller battery pack.

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.

Two federal agencies have opened investigations into crashes of two of its models on California freeways.

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.

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