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More Time Needed For Tesla’s New Factories To Ramp Up Production

More Time Needed For Tesla’s New Factories To Ramp Up Production
After beating Wall Street forecasts for third-quarter revenue driven by record deliveries, United States based electric car maker Tesla Inc has said that there would be pressure on its margins because of forthcoming plants and supply-chain challenges.
Compared to its competitors, Tesla, the world's most valuable carmaker, has fared better in the face of the Covid-19 pandemic as well as the global supply-chain problem. The estimate beating latest quarter also was the sixth straight quarter when the company reported record revenue, and the latest performance was powered by increased output at its Chinese plant.
However, due to supply chain interruptions and the time necessary to scale up production at new plants in Berlin and Texas, the firm run by billionaire Elon Musk, has problems in generating profitability in the next few quarters.
"There's quite an execution journey ahead of us," Chief Financial Officer Zachary Kirkhorn said, referring to the new factories.
He went on to say that price changes in raw materials such as nickel and aluminium have produced an "uncertain environment with respect to cost structure."
Despite this, he stated that Tesla was "quite a bit ahead" of its goal of increasing deliveries by 50 per cent for the current year.
"Q4 production will depend heavily on the availability of parts, but we are driving for continued growth," he said.
So far this year, shares of Tesla are up by 23 per cent. 
For the first time, Musk was not present on the quarterly results call, which may have disappointed investors eager to hear the celebrity CEO's newest opinions.
According to IBES statistics from Refinitiv, Tesla’s third-quarter sales increased to $13.76 billion compared to $8.77 billion for the same period a year ago, slightly surpassing the estimates of analysts.
Tesla also reported a 28.8 per cent rise in the quarter for its automotive gross margin, excluding environmental credits, compared to 25.8 per cent for the metric in the previous quarter, Tesla's total average price declined as more low-cost Model 3 and Model Y cars were sold, while prices in the United States were hiked.
Since the company sold more of its lower-priced Model 3 and Model Y cars, there was a fall in Tesla's overall average price. The company however raised prices for its cars in the United States.
During the quarter, strong sale in China was reported by Tesla. The company said that the production of its low-cost manufacturing unit in Shanghai during the quarter had overtaken that of Tesla’s factory in Fremont, California.
In its entry-level vehicles sold outside of China, the company intends to employ lithium iron phosphate (LFP) battery chemistry, as it is less expensive compared to conventional batteries but also has a shorter range. Tesla also said. According to analysts, this strategy of the company would help it to keep down costs while also addressing shortages of battery-making materials.
The company expects that it would be able to deliver the first vehicles that would be fitted with its own 4680, the larger battery cells, early next year. Tesla however did not specify the models that would be fitted with the batteries. Tesla would be able to provide a $25,000 car in three years if it used its own cells, Musk had said in September of last year.

Christopher J. Mitchell

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