Tesla losses spike as it fights to ramp up Model 3

Tesla's Model 3 may not satisfy 'mainstream' buyers
Tesla's Model 3 may not satisfy 'mainstream' buyers

While one of Elon Musk's companies is celebrating after launching the world's most powerful rocket into space, another company is fighting for liftoff back on Earth.

Tesla (TSLA) said Wednesday that its losses soared to $675 million in the final three months of 2017, up from $121 million in the same period a year earlier, as the company worked to ramp up production for the Model 3 sedan.

It was the largest quarterly loss in Tesla's history, but narrower than Wall Street had expected. Tesla's stock was essentially flat in after hours trading Wednesday following the earnings report.

Tesla has struggled to overcome bottlenecks and delays in producing the more affordable Model 3, with the hope of becoming a truly mainstream car maker.

"We were in a deeper level of Hell than we expected," Musk said on a conference call with analysts Wednesday. In particular, Musk noted unexpected difficulties with producing battery modules for the Model 3.

"We were probably a little overconfident, a little complacent, in thinking this is something we know and understand," Musk said of the battery production.

The electric car company continues to predict it will be able to produce 5,000 Model 3 vehicles a week by the end of the second quarter of this year. But it once hoped to reach that goal by the end of 2017.

Related: SpaceX launches Falcon Heavy, the world's most powerful rocket

"It is important to note that while these are the levels we are focused on hitting and we have plans in place to achieve them, our prior experience on the Model 3 ramp has demonstrated the difficulty of accurately forecasting specific production rates at specific points in time," the company wrote in a letter to shareholders Wednesday.

Tesla delivered 1,542 Model 3 vehicles in the quarter, barely making a dent in the reservation list for the new car, as it faced production delays.

Demand for its other two cars, the Model S and X, helped push Tesla's sales to $11.8 billion for 2017, up 55% from the year prior. But Tesla losses for the year almost tripled to nearly $2 billion.

"Tesla's production ramp-up of all models, including the new Model 3, is concerning," Karl Brauer, executive publisher of Kelley Blue Book's KBB.com, said in a statement. "At some point the company must produce vehicles, profitably, at a high volume. The timeline to do that remains murky."

The Tesla earnings report comes one day after Musk's other company, SpaceX, successfully launched the massive Falcon Heavy rocket. It carried Musk's personal Tesla roadster on board.

Shortly before the conference call, Musk tweeted a picture of his car "on its journey to Mars orbit and then the Asteroid Belt."

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