Tesla deliveries rise in third quarter, but Model 3 faces 'bottlenecks'

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Additionally, the stronger sales for Model 3 in the coming quarters could mean lower sales for high-end models of Tesla.

On Friday, Tesla and SpaceX CEO Elon Musk said that the company was halfway done building the battery bank that will become the world's biggest battery once it's complete. All up, the company expects to deliver around 100,000 of those vehicles in 2017, a 31 percent increase on its 2016 effort.

Tesla had said in August that it should be able to achieve production of around 1,500 cars during the quarter, so it clearly undershot its earlier target.

Musk said Model 3 production would climb to 50,000 a month by the end of next year. Model 3 production was less than anticipated due to production bottlenecks. In contrast, Tesla didn't provide more detailed guidance on Model 3 production or delivery.

Tesla says it built 25,336 vehicles - 260 of them Model 3 sedans - in the third quarter of 2017.

"We understand what needs to be fixed and we are confident of addressing the manufacturing bottleneck issues in the near-term", the letter added.

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But Tesla said on Monday that a handful of systems at its Fremont, California, vehicle plant and its battery factory in Reno, Nevada, "have taken longer to activate than expected".

"I would simply urge people to not get too caught up in what exactly falls within the exact calendar boundaries of a quarter, one quarter or the next, because when you have an exponentially growing production ramp, slight changes of a few weeks here or there can appear to have dramatic changes, but that is simply because of the arbitrary nature of when a quarter ends", Musk said. "This is the first volume vehicle they've ever produced".

"We learned a significant amount of lessons with 3", he said.

Production of Tesla's first mass-market electric auto is off to a much slower start than expected, with barely a fifth of the vehicles that had been predicted rolling off the production line. The company knows it won't be easy, as Musk alluded to the upcoming "manufacturing hell" at the Model 3 launch this summer. Not including Model 3, total Model S and Model X deliveries through the first three quarters is approximately 72,900, so the company will need to deliver approximately 27,100 more Model S and Model X vehicles in the fourth quarter, of which almost 5,000 are now in transit.

However, many market analysts have started talking about Tesla losing ground to Chevrolet Bolt EV.

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