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Tesla continues to struggle with production, but it’s sticking to its 2016 delivery goals

Second-quarter results missed Wall Street expectations.

Electric Car Maker Telsa Announces Nevada Site For New Battery Factory Photo by Max Whittaker/Getty Images

Another quarter, another missed delivery target for Tesla. Still, the company said it was on track to meet its goal of delivering 50,000 cars by the end of 2016.

CEO Elon Musk said in a letter to shareholders that production levels are up 18 percent from the first quarter and 43 percent year-over-year, but that output was still several thousands of vehicles short of the company’s goal of producing 20,000 cars and shipping 17,000 by the end of the second quarter.

Tesla’s second-quarter financials also missed Wall Street’s expectations. The company posted a $1.06 loss per share instead of the expected $.60 loss on revenue of $1.5 billion, lower than the $1.6 billion the Street estimated. Investors appeared unfazed, with the stock trading flat after hours.

Tesla delivered a total of 14,402 new vehicles in the quarter ending in June, and exited the quarter after producing 18,345 cars. That amounts to a production rate of 2,000 vehicles per week.

“Production hours per vehicle also declined throughout the quarter for both cars,” Musk wrote. “Based on this progress, vehicle production is now on track to support about 50,000 deliveries in the second half of this year, with automotive gross margin improvement.”

Musk attributed the delivery goal shortfall to a “steep production ramp.”

“We had a lot of challenges in the production ramp, always the most difficult time when you’re going from zero to 1000 cars a week,” Musk said during the earnings call. “You have to pull this huge baggage train of suppliers along with you, and you have to solve a lot of issues internally. But now we’re pretty stable at the 2000-cars-a-week level, and each passing week it gets better and better.”

Despite a news-heavy quarter — from the agreement to acquire Solar City to the opening of the Gigafactory to the reveal of Musk’s “Master Plan Part Deux” — Musk wrote that the company is still laser-focused on launching production of the Model 3 in 2017 as scheduled. Initially Musk said he hoped to begin production on July 1, 2017. However, Musk said that realistically, production will start sometime shortly thereafter.

“I don’t expect us to be at full production at July 1,” he said. “But I have to drive all suppliers and all internal efforts to that date knowing that some will fall short, and those who fall short will be cut out of the picture. And if there are teams internally that fail to execute effectively, we’ll reorganize those teams.”

In the letter to shareholders, Musk wrote that the design phase of the Model 3 production planning has been completed.

“Some Model 3 production equipment is already on line, including initial capacity in our stamping and paint centers,” he wrote. “Later this year, we plan to begin construction of new Model 3 body and general assembly centers.”

In addition to ramping up production, the company also expects to open a new retail location every four days in new and existing markets.

As for what the company will do now that it has cut ties with Mobileye — which previously supplied Tesla with the image recognition technology in the company’s semi-autonomous feature called Autopilot — Musk said that an announcement is coming and that they will have an “internal solution” to replace Mobileye’s.

Without going into too many details, Musk said the company also is working on developments in autonomous technology that will blow consumers’ minds.

“I mean it blows my mind,” he said.

Read this next: Tesla’s ‘master plan’ for a network of self-driving cars may not work without a partner like Uber or Lyft

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