Tesla shares down 5% after reporting bigger than expected loss of $2.92 per share

Tesla shares fell Wednesday after the company posted a wider-than-expected loss as it spent heavily to ramp up production of its Model 3, its first mass market electric sedan.

Complications with Tesla's manufacturing processes have slowed production of the Model 3, a car widely considered key to Tesla's future success. Hopes for the Model 3 have helped propel Tesla's stock so far this year.

Tesla said in a letter to shareholders it expects to achieve a production rate of 5,000 Model 3 cars per week by late in the first quarter of 2018. Previously, the company had said it hoped to achieve that number by the end of 2017.

Tesla shares were down 5 percent in extended hours trading.

Here's how the company did compared with what Wall Street expected:

Loss per share of $2.92 vs. $2.29 expected according to Thomson Reuters
Revenue of $2.98 billion vs. $2.95 billion expected according to Thomson Reuters

Tesla said it had record net orders and deliveries of its Model S and Model X in the third quarter, and said its production rate of the Model 3 is steadily increasing.

The high degree of automation on the Model 3 production line has proven challenging, said Tesla in the shareholder letter.

"We continue to make progress resolving early bottlenecks related to these issues, and there remain no fundamental problems with our supply chain or any of our production processes," Tesla said in the letter.

Tesla said that Model S and Model X are on pace for about 100,000 deliveries in 2017, an increase of 30% compared to 2016. However they plan to produce about 10 percent fewer cars of both models in the fourth quarter as it devotes more production to Model 3. Inventories of finished Model S and X cars are expected to decline as a result.

The company also expected non-GAAP automotive gross margin to temporarily decline slightly in the fourth quarter to about 15 percent, before recovering in the first quarter of 2018.

Tesla reported a net loss of about $619.4 million, or $3.70 per share, compared to a net income of nearly $21.9 million, or 14 cents a share, a year ago.

On an adjusted basis, Tesla lost $2.92 a share, which was wider than expected, according to a consensus estimate from Thomson Reuters.

The company said it has a cash balance of $3.5 billion entering the fourth quarter.

Tesla fired several hundred employees in recent weeks, particularly from its Model S and X departments, and its solar panel business. The United Auto Workers has filed a complaint against Tesla with the National Labor Relations board over the terminations.

Tesla said it fired the employees based on performance reviews, but some employees and former employees said reviews never took place.

Shares of Tesla have risen more than 50 percent since the beginning of the year. Shares of far larger automaker General Motors have climbed about 23 percent, while Ford shares are up nearly 2 percent.

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