As electric car maker Tesla Inc. (TSLA) continues ramping up the roll out of its more affordable compact sedan Model 3 after missing production estimates, analysts say continued delays could have a big impact on future sales.
On Wednesday, The Wall Street Journal reported that Tesla began telling reservation holders new to the company that they could start ordering their cars after production delays dragged out the release of the car, which was first announced in 2016. Tesla declined to comment for this story.
Tesla ended its fourth quarter saying that it is still aiming for a weekly production rate of 2,500 cars a week by the end of Q1 after decreasing its goal from 5,000 a week, and only managed to deliver 1,542 Model 3 cars during the quarter.
Now, analysts say Tesla needs to start delivering on its promises.
"[Chief Executive Elon Musk] makes many commitments, and some of them he doesn't necessarily meet," IHS Markit auto analyst Tom Libby said.
If Tesla doesn't deliver both volume and quality over the next year or so, investment research firm Cascend analyst Eric Ross said customers may not wait around, as competitors like Ford Motor Co. (F) , Nissan (NSANY) and General Motors' (GM) Chevrolet division will have similar models on the market. While buyers have been waiting, Musk has announced other new products like electric trucks and high-end roadsters that Ross said feel like distractions from the Model 3 setbacks.
"It seems like every time there's a delay, there's a new design that comes out," Ross said. "I guess you can argue that [Tesla] is innovative, it's the future, but Ford knows how to make cars."
Plenty of customers are waiting for the compact sedan, with Tesla last announcing that it had received 455,000 net reservations at the end of Q2 in 2017. Despite the setbacks, the model is still greatly appealing to consumers, but that appeal is a double-edged sword for the company, Libby said.
"It's frustrating for customers who had anticipated delivery way before now," he said. "On the other hand, [the delay] demonstrates a commitment to quality by not rushing it [and] creates some interest in the vehicle -- with fewer around, there's more curiosity." Libby added that fans might be turned off if the quality isn't worth the wait once cars are off the line.
Tesla shares have risen 37.52% over the past 12 months, increasing 13.07% since the beginning of this year.