Tesla shifts into reverse after weak sales spark Model 3 fears

Tesla (NASDAQ:TSLA) shares have come under pressure this week after the electric car maker reported weaker sales than expected, just as it prepares to launch the highly-anticipated Model 3.

Earlier this week, Tesla said it delivered about 22,000 Model S sedans and Model X sport-utility vehicles in the second quarter, below Wall Street’s forecast for 24,200 vehicles. The Palo Alto, California-based automaker said a production delay with 100 kilowatt-hour battery packs was behind the sales miss. But the news raised concerns among investors that Tesla could run into production issues with the Model 3, its first electric car for the mass market.

Goldman Sachs analysts subsequently cut its price target for Tesla to $180 from $190, citing flat sales of the Model S and the possibility that Tesla could fall short of its Model 3 launch goals.

Tesla’s stock tumbled 7.2% on Wednesday, and shares dropped another 4.1% at $313.78 in Thursday trading. The selloff comes on the heels of an all-time high of $386.99 recorded in June.

Adding to the downward pressure on Thursday, the Model S failed to qualify for a Top Safety Pick award from the Insurance Institute for Highway Safety as a result of the group’s latest tests. The Lincoln Continental, Mercedes-Benz E-Class and Toyota (NYSE:TM) Avalon were the only large sedans to ace the small overlap crash test, which simulates a vehicle striking an object at a front corner. The Model S received a grade of “acceptable.”

The sales miss coincides with mounting competition from traditional car makers such as Volvo, which announced on Wednesday that it would only build electric or hybrid vehicles after 2019. The Swedish brand, owned by China’s Geely, is the first manufacturer to make such a move.

Other automakers are accelerating efforts to offer long-range electric vehicles similar to the ones Tesla offers. In some cases, they have beat Tesla to market.

General Motors (NYSE:GM) began selling the Chevrolet Bolt at the end of 2016. The Bolt, starting at $37,500, can travel 238 miles on a full charge. Meanwhile, Tesla’s Model X crossover will have a new competitor in the Jaguar I-Pace. Jaguar Land Rover has indicated that a U.S. launch for the all-electric I-Pace will come in 2018. Mercedes, Audi and BMW also have electric SUVs in the works.

Earlier this week, Tesla CEO Elon Musk said the Model 3 will begin production on Friday. Musk also reiterated Tesla’s goal of building 5,000 vehicles per week by the end of 2017.