Tesla shares recover from bottleneck fears

(Reuters) - Investors put aside worries about Tesla Inc TSLA.O meeting production targets for its Model 3 mass-market sedan to push the electric car maker's shares higher on Tuesday, overturning an initial drop of almost 3 percent.

Tesla stirred concern among some analysts and investors on Monday by producing just 260 of the 1,500 sedans it had promised in the third quarter, citing bottlenecks in production.

But a number of analysts from some of the major brokerages who have backed the stock through a 60 percent rise this year said the shortfalls were normal for a fledgling car company and offered an opportunity to buy the stock.

“Most auto launches have hiccups, and Tesla is no exception,” Morgan Stanley analysts wrote in a note.

Tesla shares rose just over 1 percent in midday trading in New York.

The moves also followed a series of announcements by rival General Motors GM.N on its own electric car ambitions, which included a promise to take "bold steps" toward the first completely driverless vehicles.

Tesla, which warned when it launched the sedan in July that it was entering “manufacturing hell”, is aiming to produce 5,000 a week by the end of the year.

“We see the 5k a week production goal to exit 2017 at risk given the lack of disclosure provided in fixing the ‘handful’ of subsystems that are taking longer than expected,” said Cowen and Co analysts, who already rate Tesla an underperform.

“We remain negative on shares given the execution that is currently priced in despite anticipated competition and capital needs.”

Tesla said that there were no fundamental issues with the Model 3 production or supply chain and production issues would be addressed in the near term.

“Although Model 3 deliveries were slightly below the range, production challenges were expected for the first quarter of Model 3 production, and we expect production to significantly increase in Q4,” Baird analysts wrote in a note.

GM on Monday also outlined plans to add 20 new battery electric and fuel cell vehicles to its global lineup by 2023.

“In the coming months, we’ll take the next bold steps in testing our autonomous technology as we lead the way to fully self-driving vehicles without any human driver as a backup,” GM Chief Executive wrote in a blog post on Monday titled “Zero Crashes, Zero Emissions, Zero Congestion”.

GM shares were up 2.8 percent at $43.34.

Editing by Patrick Graham