Elon Musk Reassures Investors as Tesla Ramps Up Model 3 Output

The electric-car maker Tesla faces challenges in introducing its first mass-market vehicle, but the company’s chief executive, Elon Musk, sought to reassure investors on Wednesday that the company was up to the task.

Tesla may experience some fluctuations in production rates, Mr. Musk said, but “people should have zero concerns” about the company’s ability to increase production of the new offering, the Model 3.

Mr. Musk’s comments came on a conference call after Tesla announced it's second-quarter earnings. Despite the company experiencing a widening loss as it continued to invest in factories to accommodate the Model 3, investors found plenty to like in its prospects. Tesla shares were up more than 7 percent in extended trading.

Tesla said it lost $401.4 million in the quarter that ended June 30, compared with a loss of $293.2 million in the same period in 2016.

At the same time, the company reported overall growth in its operations, which include its automotive business and its solar-panel division.

Tesla said total revenue for the quarter was $2.79 billion, more than double the $1.27 billion it recorded in the comparable period last year.

Revenue from the company’s auto operations was $2.29 billion, compared with $1.18 billion a year earlier.

Despite the wider loss in the quarter, Mr. Musk said the company was on track in many areas — including batteries, solar panels, and maintaining sales of its existing vehicles, the Model S sedan and Model X sport utility vehicle — even as it rolls out the Model 3.

He added that Tesla was starting to look at locations for battery factories in China and Europe, although he said most of its battery production would probably remain in the United States.

Although Tesla posted stronger sales of the Model S and the Model X, the biggest challenge it faces is preparing for the introduction of the Model 3, the company’s first foray into the mass market, with prices starting at $35,000.

Tesla has consistently lost money because of heavy spending on research, product development and equipment for its assembly plant in California and its battery factory in Nevada.

Mr. Musk has said Tesla is earning good margins on the small number of Model S and Model X vehicles it has sold.

Although sales are rising, the per-car profit is not nearly substantial enough to cover the company’s high investment costs.

Tesla’s best hope for improving its financial results is to produce a steady flow of Model 3 vehicles for delivery to customers later this year.

Interest in the new vehicle has been huge since the company began taking $1,000 deposits on it more than a year ago.

Industry analysts have been hesitant to express doubts about Mr. Musk, mostly because Tesla has already defied expectations for a start-up automaker.

But investors are scrutinizing how quickly the company can accelerate production to begin delivering a significant number of Model 3s to buyers this year.

Mr. Musk’s widely reported comment last week that Tesla faces six months of “manufacturing hell” has caused some analysts to question whether the company can meet its aggressive targets.

“This of course raises questions about Tesla’s broader ability to scale not just its manufacturing, but the entire supporting infrastructure,” said Clement Thibault, an analyst with the website investing.com.

The first Model 3s to be built will primarily be more expensive variations, at $44,000, equipped with longer-range battery packs. Tesla will then add production of the base-price version.

The higher-priced, option-laden Model 3s could generate better profit margins.

Tesla is also gaining some ground in the marketplace. Sales of the Model S and Model X in the United States totaled 3,100 vehicles in July, according to the research firm Autodata, and overall sales for the first seven months of the year had increased by 35 percent over the same period in 2016.