Despite the disappointing start to the manufacturing and production of the Model 3, shares of Tesla still managed to rally on Wednesday.
Reports have revealed that the American car maker has missed production targets once again. Tesla reported that they were able to produce only 260 of its 1,600 expected manufacture of Model 3 cars during the third quarter. 220 Model 3s were also manufactured last August, coming up far short of its promised delivery of 1,500. Tesla delivered a total of 26,150 vehicles during the third quarter.
However, instead of the expected response – stocks going down due to repeated missed delivery expectations – to the news, Tesla stocks rose by nearly 2% this Wednesday, climbing to $358.62.
According to an analyst, Tesla stock became the most profitable sector last September. They further noted that “short risk in the Auto Manufacturer Sector is spread around the globe with $33.6 billion at risk and only $13.1 billion of that in the U.S.”
Analysts also cited that high production quality as the possible reason why Tesla was not able to meet the expected number of manufactured models, explaining that Tesla enjoys “economies of scale” from its Gigafactory which ensued to packing more power in its batteries. The result is a $140 per mile range for the Model 3 compared to an estimated $236 per mile range of other competitors.
German carmakers, BMW and Mercedes, bet that they can beat Tesla and other start-up carmakers through a mass producing “new electric cars based on conventional vehicles.”
Electric motors have smaller size compared to petrol or diesel engines which can make newly designed electric vehicles benefit from a possibly bigger passenger space. The problem, as analysts noted, was that the smaller cars’ unique designs require dedicated production lines and new factories that sway towards the more expensive side.
BMW had a first-hand experience with this after they have poured billions into custom-built carbon-fiber based electric cars, the i3 and i8, yet still failed to sell the models in large numbers.
Klaus Froehlich, BMW research, and development chief stated, “It is easy to build an electric car. It is difficult to earn money with it.”
After Tesla offered its cheaper Model 3, BMW made a U-turn strategy to build more electric cars, pledging to create a battery-powered version of their regular models.
BMW is also gearing to launch an all-electric version of its popular X3 off-roader, while Mercedes-Benz will release their electric EQ, based on its best-selling SUV, the GLC. The electric cars will launch in 2020 and 2019 respectively.
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