Tesla Is Cranking Out Model 3s—Now It Has to Service Them

Tesla has cranked up its Model 3 production in recent months, enabling buyers like Mr. Schmidt to get their vehicles after long waits. But as Tesla’s U.S. sales approach those of luxury auto makers like BMW AG and Daimler AG’s Mercedes-Benz, it has encountered new logistical problems, from delivery and servicing of a growing fleet to balancing supply and demand.

Part of the problem is that Tesla, unlike other auto makers, doesn’t have a network of hundreds of franchise dealerships to sell and service its vehicles. Tesla has long touted this as an advantage, giving it more control over the customer experience. But it means Tesla has to pay for service centers and to staff them.

Mr. Musk said Tesla has erred by storing service parts at distribution warehouses rather than more locally at service centers, noting a simple repair could take days waiting for parts to arrive.

He also has said on Twitter that he wants to bring more collision work in-house. Body shops are a low-margin business and come with high costs to stock the proper equipment and hire trained staff.

“It is going to be astronomical,” Dan Brennan, who has owned a body shop in Orlando, Fla., for about 40 years, said of the costs. Mr. Brennan stopped doing Tesla work about a year ago, frustrated with waiting on the company.