• Image Credit: Drew Phillips
  • Image Credit: Drew Phillips
  • Image Credit: Drew Phillips
  • Image Credit: Drew Phillips
  • Image Credit: Drew Phillips
  • Image Credit: Drew Phillips
  • Image Credit: Drew Phillips
  • Image Credit: Drew Phillips
  • Image Credit: Drew Phillips
  • Image Credit: Drew Phillips

Tesla says it is on track to achieve its production targets for the Model 3, denying a report of further delays and quality issues for its latest and most-affordable sedan.

Tesla's problems with battery production at its Gigafactory in Sparks, Nevada, are worse than it had acknowledged, CNBC reported earlier in the day, citing some company employees.

The problems included Tesla as recently as mid-December needing to resort to hand assembly of some batteries and borrowing scores of employees from battery supplier Panasonic to help with the task, CNBC had said. The report also claimed that quality-control personnel were inexperienced, and that some batteries were leaving the Gigafactory with a potentially dangerous "touching cells" flaw.

The report cited a current Gigafactory engineer who said that in the mid-December hand-production frenzy, workers were manually "slapping bandoliers together as fast as they possibly could," with the potential for misalignment. A bandolier is a subunit of a Tesla battery.

This report follows recent claims by some new owners of Model 3s that "bait-and-switch" tactics were used and they received cheaper materials than expected on a $5,000 premium-interior upgrade.

Tesla shares closed down 2.4 percent on Thursday following the report, but rose 1.6 percent in extended trading after the company said it had no further production setbacks.

"To be absolutely clear, we are on track with the previous projections for achieving increased Model 3 production rates that we provided earlier this month," a Tesla spokesman said in a e-mailed statement.

"As has been well documented, until we reach full production, by definition some elements of the production process will be more manual," the spokesman said.

Earlier this month, Tesla delayed a production target for the Model 3 for the second time, disappointing investors even as it claimed "major progress" overcoming manufacturing challenges that have hampered the vehicle's rollout.

Tesla currently plans to make about 2,500 Model 3s per week by the end of the first quarter, half the number it had earlier promised. It expects to reach its goal of 5,000 vehicles per week by the end of the second quarter.

Here is Tesla's full statement about the CNBC report:

This is an extremely misinformed and misleading article. To be absolutely clear, we are on track with the previous projections for achieving increased Model 3 production rates that we provided earlier this month. As has been well documented, until we reach full production, by definition some elements of the production process will be more manual. This is something Elon and JB discussed extensively on our Q3 earnings call, and it has no impact on the quality or safety of the batteries we're producing. As noted in our Q4 deliveries release, during the fourth quarter, "we made major progress addressing Model 3 production bottlenecks, with our production rate increasing significantly towards the end of the quarter."

Furthermore, as is often the case in manufacturing, some parts of the production process require the expertise of employees with engineering or manufacturing experience, and others don't. We've created thousands of new high-quality jobs in Nevada in recent years. As we continue to expand Gigafactory 1 and ramp Model 3 production, we've been able to teach new skills to thousands of new employees, many of whom had no manufacturing experience prior to joining Tesla. New hires on the module line receive extensive training, including safety training, and learn about the importance of proper cell-to-cell spacing so they can identify such issues in the production process. More broadly, battery production – and the module line in particular – is overseen by our top engineering talent, and many of Tesla's most senior leadership.

Finally, the implication that Tesla would ever deliver a car with a hazardous battery is absolutely inaccurate, contrary to all evidence, and detached from reality. It is irresponsible to suggest as much based on unnamed, anonymous sources who have provided no such evidence and who obviously do not have a complete understanding of the extensive testing that all batteries in Tesla vehicles are subjected to. As with Model S and Model X, which have well demonstrated safety records, we maintain a rigorous approach to quality and process control for the Model 3 battery. Even more importantly, to our knowledge, there has not been a single safety concern in the field related to Model 3 batteries at any point over the six months of Model 3 production.

As for the assertion about cells touching in Model 3 batteries, this is extremely misleading and displays a complete lack of basic knowledge about how our batteries work. Every battery in a Tesla vehicle has thousands of cells, the vast majority of which are at the same voltage potential as neighboring cells. Hypothetically, even if two cells of the same voltage potential were touching, there would be absolutely zero impact, safety or otherwise – it would be as if two neutral pieces of metal touched. Despite this fact, all Model 3 battery modules' cell positions are measured twice in manufacturing to verify process control and quality of outgoing parts. Conversely, if at any point in the production process cells are touching at different voltage potentials, they cannot be electrically interconnected. Over the course of the production process, we conduct three different tests to ensure the right number of cells are electrically connected in Model 3 modules. Additionally, the long term reliability of cell position is something validated through testing, including shock and vibration, and high temperature and humidity testing, as well as thermal cycling endurance testing throughout design and via sampling in production. All of this testing is designed to prevent touching cells from being installed in any of our vehicles, including Model 3. Finally, the safety aspects of our module design would continue to function even in the presence of touching cells, so the concerns raised are further unfounded.

These false claims are being made even though we have a proven history of making the safest vehicles on the road, with Model S and Model X receiving 5-star safety ratings not only overall but in every subcategory. Although not yet tested by NHTSA, Model 3 has been designed and internally tested to have the same result. Data from NHTSA's testing shows that Model S and Model X have the two lowest probability of injury scores in the history of NHTSA testing. Furthermore, over billions of miles of actual driving, Tesla's vehicles have been roughly five times less likely to experience a fire than a conventional gasoline vehicle. In light of these facts, it's preposterous to suggest that a company as committed to safety as Tesla would allow untested or unsafe batteries to go in our vehicles.

Reporting by Aishwarya Venugopal

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