Tesla Set Back by Battery Problems

Tesla's (NASDAQ: TSLA) problems with battery production at the company's Gigafactory in Sparks, Nevada, are worse than the company has acknowledged and could cause further delays and quality issues for the new Model 3, according to a number of current and former employees of the electric car company.

They said these problems include the necessity of Tesla making some of the batteries by hand and borrowing scores of employees from one of its suppliers to help with this manual assembly.

Tesla's future as a mass-market carmaker hinges on automated production of the Model 3, which more than 400,000 people have already reserved, paying $1,000 refundable fees to do so.

The company has already delayed production, citing problems at the Gigafactory. Last November, CEO Elon Musk assured investors in an earnings call that Tesla was making strides to correct its manufacturing issues and get the Model 3 out.

But more than a month later, in mid-December, Tesla was still making its Model 3 batteries partly by hand, according to current engineers and ex-Tesla employees who worked at the Gigafactory in recent months. They say Tesla had to "borrow" scores of employees from Panasonic, which is a partner in the Gigafactory and supplies lithium-ion battery cells, to help with this manual assembly.

A Tesla spokesperson told the media: "Until we reach full production, by definition some elements of the production process will be more manual. This is something Elon and [CTO] J.B. [Straubel] discussed extensively on our Q3 earnings call, and it has no impact on the quality or safety of the batteries we're producing."

Tesla shares gained $2.80 to $340.44 Friday noon.