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Tesla Misses its Model 3 Targets, Still Hits Record Production Numbers

Author: Eric Walz   

Tesla released its production numbers today for Q1 and the numbers look positive, despite falling short on projected targets. Amid production delays and quality issues with the Model 3, Tesla still managed to build 34,494 vehicles in Q1 2018—its "most productive quarter" in history the company said. The figure represents a 40% increase over Q4 2017.

In Q1, Tesla had 9,766 Model 3s rolling off its assembly line along with 24,728 units of the Model S and Model X. Tesla went on to note it achieved the "fastest growth of any automotive company in the modern era" and claimed "If this rate of growth continues, it will exceed even that of Ford and the Model T."

While less than a third of the vehicles were Model 3s, Tesla says production of the entry-level EV "increased exponentially, representing a fourfold increase over last quarter." Production has doubled on a weekly basis and Tesla says this was a result of addressing and correcting "production and supply chain bottlenecks, including several short factory shutdowns to upgrade equipment."

The company said it made 9,766 Model 3 vehicles in the first quarter, reflecting a four-fold increase from the fourth. Significantly, Tesla said it expects to make 2,000 over the next seven days, which it said "is a testament to the ability of the Tesla production team."

Most notably, Tesla said  it "does not require" any additional capital in 2018 through a sale of stock or issuance of debt. That may come as a relief for investors worried that the company could dilute their shares to offset heavy losses.

Tesla's stock had jumped more than 5% to about $267 in early afternoon trading.

The company's shares had fallen sharply in recent weeks amid scrutiny of the company's manufacturing and over a fatal crash in California involving a Model X that raised concerns about the safety of the company's Autopilot semi-autonomous highway driving system.

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The Tesla Model 3

Tesla Still Aims to Build 5,000 Model 3s Per Week

In the past week alone, the company built 2,020 Model 3s and expects to produce another 2,000 Model 3s this week as well as 2,000 Model S and X vehicles. Tesla says this accomplishment will highlight the fact that Model 3 production exceeds that of the Model S and Model X. Many anxious reservation holders may finally receive their Model 3s this year.

Tesla also wrote that its Model 3 production rate will climb rapidly through Q2. Tesla continues to target a production rate of approximately 5,000 units per week three months from now, laying the groundwork for Q3 to have the long-sought ideal combination of high volume, good gross margin and strong positive operating cash flow.

Tesla also confirmed that almost all Model 3 cancellations have been the result of delays. This includes both production delays and the delay of high-profile options such as all-wheel drive and the standard battery which will finally enable the Model 3 to hit its highly touted $35,000 price tag. Despite this, Tesla says Model 3 reservations have remained stable throughout the first quarter of 2018.

Last year, Tesla CEO Elon Musk said Tesla would produce 2,500 Model 3 each week by the end of Q1 2018. Tesla missed its target by producing only 9,766 Model 3 sedans. However, the company still built a respectable number of vehicles overall.

Although Tesla remains short of its goals, Musk claimed that Model 3 production would be much higher than it currently is. In fact, Tesla initially intended on producing 5000 Model 3 sedans per week by the end of December 2017. In January, this target was pushed back until the end of the second quarter.

Is Tesla Really in That Much Financial Trouble?

Is a fluctuating stock price and production woes enough to doom Tesla? Probably not. Historically, other companies have been through worse and managed to bounce back and then some. In the company's press release, Tesla made a reference to the Ford Motor Company.

Ford Motor Company's was first incorporated on June 6, 1903. A decade later Ford introduced the moving assembly line in 1913, and its production soared. By 1915, just twelve years after incorporating, Ford built is 1 millionth car—an extraordinary feat for a twelve-year-old car company.

Like Tesla, Ford has also experienced plummeting stocks in the past. Ford's stock saw its worst trading day on November 19, 2008. The stock fell -33.33% after reports were released that suggested a possible bankruptcy of General Motors. At the time, Ford was trading at less than $2.00 a share. Despite the fall, Ford bounced back and saw its best trading day ever just a few days later.

On November 26, 2008, shares of Ford surged 22.79% after news broke that the U.S. government would spend trillions to save the U.S. economy. With the possibility of a government bailout, investors could finally see an upside in the 100 year old automobile company. Similarly, despite Tesla's own setbacks, its investors may finally see an upside as well. Meanwhile, Tesla's vehicles are still desirable.

Hundreds of thousands of people have pre-ordered the Model 3 and are eagerly awaiting delivery. However, for those wanting just the $35,000 base version of the Model 3, they may have to wait a little longer. Production of base Model 3 is not expected to start until the second half of the year.

Eric Walz
Originally from New Jersey, Eric is an automotive and technology reporter specializing in the high-tech industry in Silicon Valley. Eric has over fifteen years of automotive experience and a B.A. in computer science. These skills, combined with technical writing and news reporting, allows him to fully understand and identify new and innovative technologies in the automotive industry and beyond. He has worked on self-driving cars and as a technical writer, helping people to understand and work with technology. Outside of work, Eric likes to travel to new places, play guitar, and explore the outdoors.
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