Tesla has bad news if you're waiting for a Model 3

Tesla has bad news if you're waiting for a Model 3

The EV automaker adds that it now expects to achieve a production rate of 5K Model 3 vehicles per week by late in the first quarter of 2018.

TSLA shares fell 3.8% after the bell Wednesday.

That's the message this week from Nomura Instinet, which reiterated its Buy rating on the electric automaker, noting Tesla will eventually figure out its production issues with the new Model 3 sedan.

"We expect 3Q gross margins could come in below our estimate of 17.8% due primarily to the digestion of high start-up costs related to Model 3 production, lower pricing for Model X and weaker-than-expected volumes", said the analyst, adding that production woes should begin to improve in Q4.

Tesla said the main constraint was its battery module assembly line at its Nevada Gigafactory, where the company had to redesign part of the production process. The problems could also worry the over 500,000 customers who have put down a refundable deposit on the vehicle.

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FILE PHOTO: A Tesla charging station is seen in Salt Lake City, Utah, U.S. on September 28, 2017. Tesla said in October that it produced only 260 vehicles, well below its target of 1,500. In addition to redirecting some of Tesla's best engineering talent to the factory, Musk said he is personally attacking the problem alongside his employees.

Tesla could face major new requirements for cash given Model 3 problems, a possible factory in China, and plans to develop other vehicles, including an electric heavy duty truck. It surged 51% this year through Wednesday's close, and its market cap at some point surpassed that of older rivals including Ford, Fiat Chrysler, and General Motors. It also spent $325 million to repay a credit facility in the quarter.

"Model 3 reservation holders may not be thrilled about the fact that they have to wait longer than they thought for their vehicle, but it likely won't cause them to cancel their orders en masse", Caldwell said.

As far as the company's earnings are concerned, Tesla posted an adjusted loss per share of $2.92 per share, significantly wider than the loss of $2.23 per share that Wall Street predicted.

Panasonic sees batteries as central to its plan to almost double automotive business revenue to 2.5 trillion yen by the year through March 2022.

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