Published on April 3rd, 2018 | by Steve Hanley
April 3rd, 2018 by Steve Hanley
Tesla built more cars in the first quarter of 2018 than in any other quarter in its history. Total production was 34,494 — a 40% increase from the fourth quarter of last year. Here’s the breakdown: 24,728 Model S sedans, 10,070 Model X SUVs, and 9,766 Model 3 sedans. “This is the fastest growth of any automotive company in the modern era. If this rate of growth continues, it will exceed even that of Ford and the Model T,” according to a company press release.
The press statement continues:
“We were able to double the weekly Model 3 production rate during the quarter by rapidly addressing production and supply chain bottlenecks, including several short factory shutdowns to upgrade equipment.
“In the past seven days, Tesla produced 2,020 Model 3 vehicles. In the next seven days, we expect to produce 2,000 Model S and X vehicles and 2,000 Model 3 vehicles. It is a testament to the ability of the Tesla production team that Model 3 volume now exceeds Model S and Model X combined. What took our team five years for S/X, took only nine months for Model 3.
“Given the progress made thus far and upcoming actions for further capacity improvement, we expect that the Model 3 production rate will climb rapidly through Q2. Tesla continues to target a production rate of approximately 5,000 units per week in about three months, laying the groundwork for Q3 to have the long-sought ideal combination of high volume, good gross margin and strong positive operating cash flow. As a result, Tesla does not require an equity or debt raise this year, apart from standard credit lines.”
What’s the takeaway from all that? Simply this: “We may have missed our production target by a few hundred cars a week at the end of the quarter but things are going really, really well for us and y’all should stop worrying.” (Not a real quotation.) Tesla shares are up nearly $8 in early trading. The company reports that demand for the Model S and Model X continues to be strong. With so much attention on the Model 3, the company statement included these words as well:
“The quality of Model 3 coming out of production is at the highest level we have seen across all our products. This is reflected in the overwhelming delight experienced by our customers with their Model 3’s. Our initial customer satisfaction score for Model 3 quality is above 93%, which is the highest score in Tesla’s history.
“Net Model 3 reservations remained stable through Q1. The reasons for order cancellation are almost entirely due to delays in production in general and delays in availability of certain planned options, particularly dual motor AWD and the smaller battery pack. As described above, owner happiness with the product is extremely high.”
The second quarter of 2018 could be a “make or break” period for Tesla. Some on Wall Street (and Seeking Alpha) are predicting the company will run out of money before the end of the year. The possibility of bankruptcy is begin tossed around by certain analysts essentially as a matter of routine. If the company is successful at ramping up Model 3 production to 5,000 units a week three months from now — or can at least get close to that number — will all be forgiven? Will the stock rocket to new highs? Check back with us in early July for more on those subjects.