Tesla has said it produced a record number of vehicles in the third quarter as Model 3 output was ramped up.

In Q3, Tesla produced 80,142 vehicles, 50% more than the previous all-time high in Q2. The total included 53,239 Model 3 vehicles, which Tesla said was in line with guidance and almost double the volume of Q2.

During Q3, Tesla said it transitioned Model 3 production from entirely rear wheel drive at the beginning of the quarter to almost entirely dual motor during the last few weeks of the quarter. This added significant complexity, it said. In the last week of the quarter, Tesla said it produced over 5,300 Model 3 vehicles, almost all of which were dual motor, meaning it achieved a production rate of more than 10,000 drive units per week.

Tesla Q3 deliveries totalled 83,500 vehicles: 55,840 Model 3, 14,470 Model S, and 13,190 Model X.

Q3 Model 3 deliveries were limited to North American customers only. Tesla said there remain 'significant opportunities to grow the addressable market for Model 3 by introducing leasing, standard battery and other lower-priced variants of the car, and by starting international deliveries'.

China cost competitive issues

Tesla also says demand for Model S and X remains high. In Q3, it said it was able to significantly increase Model S and X deliveries 'notwithstanding the headwinds we have been facing from the ongoing trade tensions between the US and China'. Those trade tensions have resulted in an import tariff rate of 40% on Tesla vehicles versus 15% for other imported cars in China.

In addition, Tesla said it continues to lack access to cash incentives available to locally produced electric vehicles in China that are typically around 15% of MSRP or more. Taking ocean transport costs and import tariffs into account, Tesla is now operating at a 55% to 60% cost disadvantage compared to the exact same car locally produced in China, it says. This, it acknowledges, 'makes for a challenging competitive environment, given that China is by far the largest market for electric vehicles'. To address this issue, Tesla said it is 'accelerating construction' of its Shanghai factory.

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