Tesla hits Model 3 production target, backs profit view

 July 2 (Reuters) - Tesla Inc reaffirmed a positive cash flow and profit forecast for the year on Monday after achieving its goal of producing 5,000 Model 3 electric cars in the final week of June.

Tesla, which Chief Executive Elon Musk hailed on Sunday as having become a "real car company," said it now expects to boost production to 6,000 Model 3s per week by late August, signaling confidence about resolving technical and assembly issues that have plagued the company for months.

The electric carmaker's shares rose as much as 6.4 percent to $364.78 in early trading, after Tesla said it produced 5,031 Model 3 cars in the last seven days of the second quarter. The shares gave up those gains later, however, and were down more than 2 percent by midday.

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A parking lot of predominantly new Tesla Model 3 electric vehicles is seen in Richmond, California, U.S. June 22, 2018. Picture taken June 22, 2018. REUTERS/Stephen Lam
A partially wrapped Tesla Model 3 electric vehicle is seen at a lot in Richmond, California, U.S. June 22, 2018. Picture taken June 22, 2018. REUTERS/Stephen Lam
A parking lot of predominantly new Tesla Model 3 electric vehicles is seen in Richmond, California, U.S. June 22, 2018. Picture taken June 22, 2018. REUTERS/Stephen Lam
A parking lot of predominantly new Tesla Model 3 electric vehicles is seen in Richmond, California, U.S. June 22, 2018. Picture taken June 22, 2018. REUTERS/Stephen Lam
A parking lot of predominantly new Tesla Model 3 electric vehicles is seen in Richmond, California, U.S. June 22, 2018. Picture taken June 22, 2018. REUTERS/Stephen Lam
A row of new Tesla Model 3 electric vehicles is seen at a parking lot in Richmond, California, U.S. June 22, 2018. Picture taken June 22, 2018. REUTERS/Stephen Lam
Rows of new Tesla Model 3 electric vehicles are seen in Richmond, California. Picture taken June 22, 2018. REUTERS/Stephen Lam
A car carrier trailer carries Tesla Model 3 electric sedans, is seen outside the Tesla factory in Fremont, California, U.S. June 22, 2018. REUTERS/Stephen Lam
A 2018 Tesla Model 3 electric vehicle is shown in this photo illustration taken in Cardiff, California, U.S., June 1, 2018. Picture taken June 1, 2018. REUTERS/Mike Blake
The front hood logo on a 2018 Tesla Model 3 electric vehicle is shown in this photo illustration taken in Cardiff, California, U.S., June 1, 2018. Picture taken June 1, 2018. REUTERS/Mike Blake
A 2018 Tesla Model 3 electric vehicle is shown in this photo illustration taken in Solana Beach, California, U.S., June 1, 2018. Picture taken June 1, 2018. REUTERS/Mike Blake
The wheel of a 2018 Tesla Model 3 electric vehicle is shown in this photo illustration taken in Cardiff, California, U.S., June 1, 2018. Picture taken June 1, 2018. REUTERS/Mike Blake
A 2018 Tesla Model 3 electric vehicle is shown in this photo illustration taken in Cardiff, California, U.S., June 1, 2018. Picture taken June 1, 2018. REUTERS/Mike Blake
The newly sold registration sticker on a 2018 Tesla Model 3 electric vehicle is shown in this photo illustration taken in Cardiff, California, U.S., June 1, 2018. Picture taken June 1, 2018. REUTERS/Mike Blake
The door handle on a 2018 Tesla Model 3 electric vehicle is shown in this photo illustration taken in Cardiff, California, U.S., June 1, 2018. Picture taken June 1, 2018. REUTERS/Mike Blake
The logo on a 2018 Tesla Model 3 electric vehicle is shown in Cardiff, California, U.S., in this picture taken June 1, 2018. REUTERS/Mike Blake
A 2018 Tesla Model 3 electric vehicle is shown in this photo illustration taken in Cardiff, California, U.S., June 1, 2018. Picture taken June 1, 2018. REUTERS/Mike Blake
A 2018 Tesla Model 3 electric vehicle is shown in this photo illustration taken in Cardiff, California, U.S., June 1, 2018. Picture taken June 1, 2018. REUTERS/Mike Blake
A 2018 Tesla Model 3 electric vehicle is shown in this photo illustration taken in Cardiff, California, U.S., June 1, 2018. Picture taken June 1, 2018. REUTERS/Mike Blake
A 2018 Tesla Model 3 electric vehicle is shown in this photo illustration taken in Cardiff, California, U.S., June 1, 2018. Picture taken June 1, 2018. REUTERS/Mike Blake
The interior of a 2018 Tesla Model 3 electric vehicle is shown in this photo illustration taken in Cardiff, California, U.S., June 1, 2018. Picture taken June 1, 2018. REUTERS/Mike Blake
Tesla Model 3s are shown charging in an underground parking lot next to a Tesla store in San Diego,California, U.S., May 30, 2018. REUTERS/Mike Blake
A 2018 Tesla Model 3 electric vehicle is shown in this photo illustration taken in Solana Beach, California, U.S., June 1, 2018. Picture taken June 1, 2018. REUTERS/Mike Blake
Side view of a bright red Tesla Model 3 automobile from Tesla Motors parked on the street at Santana Row, a luxury outdoor shopping mall in the Silicon Valley, San Jose, California, June 7, 2018. (Photo by Smith Collection/Gado/Getty Images)
NEW YORK, NY - JUNE 06: Tesla cars are displayed at a showroom in the Meatpacking district in Manhattan on June 6, 2018 in New York City. Tesla stock had its best day since November 2015 on Wednesday rising more than 9.5 percent after the company revealed it is nearing its Model 3 weekly production rate. Also, in a vote shareholders backed Elon Musk as chairman and CEO. (Photo by Spencer Platt/Getty Images)
A Tesla Motors mass-market Model 3 electric car is seen in this handout picture from Tesla Motors on March 31, 2016. (REUTERS/Tesla Motors/Handout via Reuters)
A Tesla Motors mass-market Model 3 electric car is seen in this handout picture from Tesla Motors on March 31, 2016. (REUTERS/Tesla Motors/Handout via Reuters)
A Tesla Motors mass-market Model 3 electric car is seen in this handout picture from Tesla Motors on March 31, 2016. (REUTERS/Tesla Motors/Handout via Reuters)
A Tesla Motors mass-market Model 3 electric car is seen in this handout picture from Tesla Motors on March 31, 2016. (REUTERS/Tesla Motors/Handout via Reuters)
A Tesla Motors mass-market Model 3 electric car is seen in this handout picture from Tesla Motors on March 31, 2016. (REUTERS/Tesla Motors/Handout via Reuters)
A Tesla Motors mass-market Model 3 electric car is seen in this handout picture from Tesla Motors on March 31, 2016. (REUTERS/Tesla Motors/Handout via Reuters)
Tesla Motors' mass-market Model 3 electric cars are seen in this handout picture from Tesla Motors on March 31, 2016. (REUTERS/Tesla Motors/Handout via Reuters)
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"We believe reaching the 5K units per week mark is ahead of investors' expectations (in the 4K to 4.5K range) for Model 3," Evercore analysts wrote in a client note. "We had expected Tesla to finish the quarter at a weekly run-rate of 4.6K units."

Money-losing Tesla has been burning through cash to produce the Model 3, and delays have also potentially compromised Tesla's first-to-market position for a mid-priced, long-range battery electric car as a host of competitors prepare to launch rival vehicles.

Some analysts questioned if Tesla would be able to sustain the Model 3 production momentum, which is crucial for the long-term financial health of the company.

"There's a big difference between making 5K Model 3 units for 1 week vs. sustaining 5K per week," Morgan Stanley analysts said.

Production of the mass-market sedan has had several issues, including problems with an over-reliance on automation on its assembly lines, battery issues and other bottlenecks.

To meet its goal, Tesla had set up a new production line inside a tent on the campus of its Fremont factory. The company said the new general assembly line was responsible for about 20 percent of Model 3s produced last week.

Model 3 production tripled to 28,578 in the company's second quarter from the previous quarter, Tesla said.

The company said 11,166 Model 3 vehicles were in transit to customers at the end of the second quarter, and would be delivered early next quarter.

Reservations at the end of the second quarter stood at roughly 420,000. Tesla has delivered 28,386 Model 3 cars to date. Model 3 reservations totaled 450,000 at the end of the first quarter.

"This is very positive news for Tesla because the Model 3 takes them from a niche core producer to a mainstream automobile manufacturer," Tigress Financial Partners analyst Ivan Feinseth said.

The company said it expects orders to grow faster than production rate after it starts allowing potential customers to see and test drive Model 3s at local stores.

Despite originally touting the Model 3 as a $35,000 vehicle, Tesla has yet to begin building that basic version and instead is currently building a higher-priced version as it tries to come out of "production hell."

"The last 12 months were some of the most difficult in Tesla's history," the company said in a statement. (Reporting by Supantha Mukherjee and Munsif Vengattil in Bengaluru Editing by Saumyadeb Chakrabarty and Tom Brown)

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