Tesla Model 3 deliveries could be worse than expected in 2018 (TSLA)

Tesla Model 3

Tesla reported third-quarter deliveries on Monday, and although it more or less hit its mark with the Model S and Model X, the numbers for the Model 3 mass-market vehicle, launched in July, greatly lagged expectations.

CEO Elon Musk said Tesla would produce 1,500 for September, but the company manufactured only 260 for the entire quarter. It's doubtful that Tesla will be able to hit Musk's target of 5,000 per week by the end of the year.

In a research note published Tuesday, Morgan Stanley analyst Adam Jonas offered some additional skepticism.

"There is some risk of micro-analyzing the monthly ramp of the Model 3," he wrote. "In our opinion, quality and attractiveness of early production is far more important than the quantity delivered – at least for now. Our 2018 target of [120,000] Model 3 deliveries continues to bake in high levels of uncertainty around future production bottlenecks."

That sounds reasonable unless you remember that Tesla has said that it will deliver 500,000 vehicles in 2018, and with production seemingly capped at around 100,000 for Model S and Model X, the bulk of that has to be Model 3. Assuming a run rate of 5,000 per week, conservatively Tesla would deliver around 250,000 Model 3 vehicles in 2018 (obviously, either the rate has to improve or additional S and X production needs to be added to hit half a million, which is full capacity for Tesla's Fremont, CA factory).

So Jonas expects Tesla to miss Model 3 deliveries by over 100,000.

That hasn't affected his Tesla bullishness, however. His price target is $317, and he outlines a "bull case" for the stock hitting $526.

Shares were trading down slightly on Tuesday, to $336.

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