Fourfold increase in Tesla Model 3 production as Musk takes the wheel

Alan Olson
April 6, 2018

Musk said on Twitter this week that he had been sleeping at the plant, and the company said some workers who normally assemble the Model S and Model X were shifted to Model 3 production. Before markets opened, Tesla's shares rose 6.5% to $268.49. Model 3 output totaled 9,766 units for the quarter compared to just over 1,800 Model 3's manufactured in the fourth quarter of 2017.

The joke ended finally in even worse taste, with a photo of Musk "passed out against a Tesla Model 3, surrounded by "Teslaquilla" bottles, the tracks of dried tears still visible on his cheeks".

Amid slowdowns in Model 3 production, Tesla has seen its shares drop nearly 18 percent since the beginning of the year. The story really hinges on the Model 3.

The real takeaway from the report is that unlike some of Musk's other notable successes, the vehicle industry may not have been as ripe for disruption as Tesla would have hoped. The comment came after Musk took issue with a report published on The Information news website, claiming that he was not in good terms with Doug Field, the company's senior engineering vice president.

Despite all the production hell and cash flow concerns in the first quarter, Tesla has announced plans to build a new truck and a roadster sports vehicle, and to build a factory in China.

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"We believe the backlog for Models S and X remains solid but that this is an area to monitor given the sequential declines". On the one hand, the company announced it had attained a target of producing over 2,000 units of the Model 2 in a single week (in all, Tesla churns out 4,000 units per week, counting the Model 3, Model s and Model X).

Competition isn't far behind, with Jaguar's i-Pace launching in early March at the high end, and the Model 3 facing the Chevrolet Bolt (launched last year), and a large number of similar long-range alternatives (including the Nissan LEAF 230-mile range version, Hyundai Kona EV, Kia Niro EV and Audi eTron) in 2018.

Tesla sees progress ahead for the mass-market sedan that keeps falling short of targets and said a capital raise won't be required this year, spurring a partial rebound for the electric-car maker's battered shares. The share price has dropped lately, but so has the amount of short interest.

Margins have been questioned but should be fixed once volume increases, and there are worries about the recent cobalt and lithium price surge affecting battery costs. Tesla manufactured 34,494 vehicles in Q1 2018, up 40 percent from Q4 2017.

The production numbers, while short of Tesla's own target, are far above the 793 Model 3s built in the final week of previous year.

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