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By Paul A. Eisenstein

Tesla is putting a positive spin on its latest production numbers, despite missing its target for the long-delayed Model 3 sedan by 20 percent — and Wall Street appears to agree.

Confirming numbers that leaked out earlier in the week, the California-based battery-carmaker said it produced 2,020 Model 3 vehicles during the most recent seven-day period, and expects to produce 2,000 more in the coming week — along with a combined 2,000 of its older Models S and X. All told, it assembled 9,766 of the smaller battery-sedans during the first-quarter, “a fourfold increase,” it stated, over the final three-month period in 2017.

But the latest numbers are still well short of the 2,500 vehicle target Tesla had laid out for itself, a gap that would work out, on an annualized basis to an annualized revenue shortfall of over $1 billion. For a company that fell deeper into the red than expected in 2017, that could be the cause of serious concern.

Other problems for Tesla include the recall of more than half the vehicles Tesla has so far built, a recent, fatal crash involving a Model X SUV operating in semi-autonomous Autopilot mode, reports of serious quality problems with parts provided by suppliers, and legal issues involving Tesla’s acquisition of alternative energy company Solar City. Many analysts have been speculating that the company could be forced to raise cash to keep going.

Yet even as shares dropped by more than one-third, investors seemed calmed that the Model 3 production shortfall wasn’t even worse.

It also helped that Tesla played up the positive in a statement earlier this week. It cited “the progress made thus far” in the Model 3 ramp-up as “laying the groundwork” getting production up to 5,000 a week by around the end of June, with an even stronger third quarter to come. “As a result, Tesla does not require an equity or debt raise this year, apart from standard credit lines.”

Rapid acceleration

For his part, ever-ebullient Tesla CEO Elon Musk was even more braggadocious than normal, asserting that production will now accelerate so rapidly it may soon “exceed even that of Ford and the Model T.” That was a clear reference to what happened more than 100 years ago when Ford Motor Co. launched its first moving assembly line and explosively increased production of a vehicle generally credited with putting America on wheels.

Efraim Levy, an auto analyst who has been one of the more bearish on Tesla, sounded a mixed tone on Tuesday. Despite being disappointed by the latest production shortfall, he issued a “hold” recommendation on Tesla stock, crediting, “our belief that Tesla will fix manufacturing issues and accelerate its production rates.” That said, Levy indicated his expectation the company will have to raise more capital, but possibly not until 2019.

There is no question Tesla needs to boost production fast — especially if it wants to hold on to the 455,000 advance reservations CEO Musk referred to during second quarter 2017 earnings call, each with a minimum $1,000 deposit.

The company subsequently warned that many of those orders would not be delivered until well into 2019 and the longer it takes to catch up the more it risks losing those potential buyers — especially as new alternatives come to market. Hyundai and Jaguar both revealed new long-range electric vehicles at the New York Auto Show last week, and in just the mainstream EV market there are expected to be at least another dozen available before the end of the decade.

Hot competition

There already have been numerous reports that Tesla’s order bank has been slipping as frustrated reservation holders have switched to existing alternatives, notably the Chevrolet Bolt EV. Demand has been strong enough for parent GM to lay out plans to boost production this year.

While a Tesla spokesman noted in a statement that “Net Model 3 reservations remained stable through Q1,” he then acknowledged losing orders. “The reasons for order cancellation are almost entirely due to delays in production in general and delays in availability of certain planned options, particularly dual motor AWD (all-wheel-drive) and the smaller battery pack.”

Losing even a small number of sales could be problematic, however, as the Model 3 carries a far smaller profit margin than the bigger and far more costly Models S and X, industry analysts have noted.

“The bigger concern is they are sacrificing Models S and X production to fix Model 3 — which generates a lot less revenue,” said analyst Dave Sullivan of AutoPacific.