In order for the Model 3 to be successful, Tesla needs to find a way to boost production or it could have to raise the electric vehicle’s price, says JPMorgan. The Model 3 is in “production hell” right now. Tesla only produced 260 vehicles during Q3, yet it wanted to make over 1,500.
Because of this issue, finding alternative ways to raise its margins could be a financial necessity.
We worry that if the vehicle proves structurally more expensive to manufacture, that in order to preserve the targeted gross margin, Tesla may need to increase the price of the vehicle to consumers, with negative implications for demand,
Tesla has around 450,000 preorders for the Model 3. Many people have been attracted to the vehicle because of Tesla’s good record with EVs and the Model 3’s relatively low price. Raising the price could reduce interest.
JPMorgan has also adjusted its Q4 production forecast for the vehicle to 15,000, half its earlier estimate.