Elon Musk: Tesla Model 3 Production Target Is Up To 200,000 In Second Half Of 2017

1 year ago by Eric Loveday 95

Tesla Model 3 - Arriving In Late 2017

Tesla Model 3 – Arriving In Late 2017

Tesla Model 3

Tesla Model 3

During Tesla’s Q1 conference call, CEO Elon Musk went into detail on the production timeline and targets for the Tesla Model 3.

Musk explained how the process works:

“I think it’s worth explaining sort of how manufacturing a complex object with several thousand unique components actually works. And what date’s relevant and – in order to achieve volume production of a new car with several thousand unique items, you actually have to set a target date internally and with suppliers that is quite aggressive.”

According to Musk, that target date in July 1 of 2017. That doesn’t mean that the Model 3 will enter production on July 1st, because as Musk explains:

“Now, will we actually be able to achieve volume production on July 1 next year? Of course, not. The reason is that even if 99% of the internally produced items and supplier items are available on July 1, we still cannot produce the car because you cannot produce a car that is missing 1% of its component.”

Musk says that actual production will be “some number of months later,” due to supply chain issues and internal production problems. This, according to Musk, is how the entire automotive industry works. In some ways then,start of production for the Model 3 is not entirely controlled by Tesla.

Musk concluded this part of the discussion with this statement:

“So in order for us to be confident of achieving volume production of Model 3 by late 2017, we actually have to set a date of mid-2017 and really hold people’s feet to the fire internally and externally to achieve an actual volume production date of late 2017.”

He then provided a production target, which is way beyond what we’d expected to hear:

“So as a rough guess, I would say we would aim to produce 100,000 to 200,000 Model 3s in the second half of next year. That’s my expectation right now.”

Up to 200,000 Model 3 produced by the end of 2017! That figure seems unbelievable, but with Musk at the helm anything is possible.

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95 responses to "Elon Musk: Tesla Model 3 Production Target Is Up To 200,000 In Second Half Of 2017"

  1. Speculawyer says:

    Is that even possible?

    1. beta995 says:

      Plans for the Model 3 assembly line have already been made.
      Since you just need an exact duplicate, and new floor space somewhere, yes.

      You simply double your manufacturing equipment order.
      There’s some HAPPY SUPPLIES of Tesla out there now.

      That should be an interesting Stock Play.

      There is added logistics cost.
      But, the staff you need to manage and install the first assembly line can just be retained to do it again at the second assembly line. IT would be smart to stagger the assembly line so that line b is built after a, not in parallel.

      1. Speculawyer says:

        Yeah, I don’t know if they have ready designs for a model 3 assembly line. They only recently got an improved Model S/X line up and running and want to upgrade their original assembly line.

        I just really hope they seriously designed the Model 3 for manufacturabilty.

        1. Alan says:

          See my 10.39 link,

          Drivetrain finished and Design almost done,

          They are not hanging around !

          1. theflew says:

            It’s not that simple. Some of the custom dies, presses, robots have a lead times of a year. I can’t imagine under any circumstances Tesla could build 100k – 200k vehicles by the end of next year. That would be a feat for even a large manufacturer that has money and expertise in changing there plants every couple of years for new models and build at that volume. There is a lot of manual work in building cars. All of those videos you see in Tesla’s plant are the early welding and painting automated lines. You don’t see the sub assemblies and all the workers needed for final assembly.

            We’re talking 500 – 1000 cars a day coming from a company that’s isn’t known for high volume or QC. Also they would have to ramp up to that 500-1000 cars/a day which means they would have to build even more to reach 100k – 200k cars by EOY. Finally more vehicles being built means more capitol also because to build that many vehicles you need to place some large parts orders with suppliers to keep things moving in the factory.

            I personally think any Model 3’s they get out next year would be a success. No reason to create a target that would be impossible for them to hit and cause doubt with registration holders.

            1. Assaf says:

              Agree with most of what you write, but wanted to point out that Tesla is already ramping up at a pretty amazing rate.

              In 2016 they are slated to beat all the established automakers worldwide in terms of number of EVs built and sold for the year. They will be close to 100k units for 2016.
              The only other outfit who might beat this is China’s BYD, and BYD doesn’t have to sell its passenger cars to Western markets.

    2. ffbj says:

      No. But the question is how close will they get? ‘Per ardua ad astra,’ It’s the motto I’ve assigned to Midas Musk, through struggle the stars.
      He sets unreasonable goals and then works like a demon, and inspires/cajoles others, in order to achieve them.

      Of course an evangelical following of like minded talented, energetic, and driven, persons is a necessity for even embarking on such an endeavor. In addition a virtually unlimited supply of money, and favorable regulations are also needed if Tesla hopes to reach the goal, or come as near as possible to it.
      Good Luck!

      1. sven says:

        Not very close, if it’s anything like the last time (last year) Tesla was seeking to raise capital and Elon cranked up the hype machine into overdrive (Ludicrous Mode)

        May 2015 – First Quarter conference call:
        – Soon after revealing Tesla’s Powerwall and Powerpack, Musk says they are sold out through mid-2016, and that demand is “crazy of the hook” with 63,000 reservations: 38,000 for the Powerwall and 25,000 for the Powerpack.
        – Musk says that Tesla won’t be able to fulfill all of those orders until sometime in mid-2016.

        August 2015 – Right before the additional stock offering:
        – Musk says Tesla has 100,000 reservations for the Powerwall/Powerpack

        First Quarter of 2016
        – Tesla abandons/cancels the 10 kWh Powerwall because there was no demand?!
        – Tesla reduces the capacity of the 7 kWh Powerwall and makes it just a 6.4 kWh Powerwall.
        – Tesla admits to Engadget that the Powerwall does not make financial sense for customers in the continental U.S., but is instead aimed at those interested in its non-economic benefits such as “energy independence, backup security, environmental reasons, and tech early adoption.” Tesla says that the Powerwall makes financial sense only in regions with renewable-energy policies like feed-in tariffs, such as Hawaii, the UK and Australia.

        May 2016 – First Quarter Conference Call
        Musk states that in the first quarter Tesla Energy delivered only “2,500 Powerwalls and nearly 100 Powerpacks.”

        That is a GINORMOUS miss. Tesla not only vastly overstated demand, it also vastly overstated how many Powerwalls/Powerpacks that it will manufacture by mid-2016. It’s safe to say that Tesla will fall woefully short of its 63,000 unit production estimate for mid-2016.

        http://www.engadget.com/2016/01/07/study-a-tesla-powerwall-pays-for-itself-after-nearly-40-years/

        1. TomArt says:

          Bear in mind that those folks “interested” did not put down $1k each – it’s easy just to click a button.

          The production expectations for Model 3 are nuts, but it is safe to say that the demand is real.

        2. Speculawyer says:

          Oh stop it. I told you at the time that the PowerPack & PowerWall presentation was just a big dog & pony show in order to assuage investors about the Gigafactory. It worked.

          And now that they have 400,000 orders for cars, they have no reason to ship more than a token number of PowerPacks & PowerWalls.

          1. Pushmi-Pullyu says:

            Well, I guess I’m not as cynical as you are about Tesla Motors.

            Certainly the stationary energy storage market was a secondary market for Tesla’s Gigafactory; obviously putting battery packs into its cars will take first priority in battery cell production.

            But unless you really think Tesla foresaw the incredible number of reservations it has gotten for the Model ≡, it seems unlikely that advertising the PowerWall and the PowerPack was “just for show”, with no intention of following through with a competitive product.

            Furthermore, if it was all for show, there seems to be little reason for Tesla to have previously cancelled its offering for the PowerWall that’s only for emergency backup, while continue to offer the type designed for daily cycling. If the intent all along was to make a fake offering then cancel it, why not cancel production of both types of PowerWall at once?

    3. Speculawyer says:

      I guess not . . .

      “Elon Musk says production deadline for Model 3 ‘impossible'”

      http://www.cnet.com/roadshow/news/elon-musk-says-production-deadline-for-model-3-impossible/

      1. Pushmi-Pullyu says:

        We have seen complaints from Musk about suppliers not taking Tesla’s orders for part seriously. Perhaps Musk has set a deadline he knows is impossible, in order to motivate suppliers to get auto parts and manufacturing equipment to Tesla sooner.

        But the old adage about “Nine women cannot produce a baby in one month” still applies. There is a minimum amount of time required to accomplish certain things, and nothing Musk can do can reduce that absolute minimum.

        Anyway, I’m not going to assert it’s impossible for Tesla to produce 100,000 or more Model ≡’s by end of 2017. But I will be more than a bit surprised if it actually happens. Tesla Motors has developed a pattern of over-promising on when they’ll actually get a car into production, or rather underestimating the time required. I see this as likely to be another in that series.

  2. Nate says:

    Wow.

    1. Anon says:

      Yeah… As much as I like and respect Elon, and all the crazy talented people at Telsa, SpaceX and SolarCity: I don’t for a moment, believe these optimistic numbers.

      Time will tell, but a totally new BEV with just a few months of vetting might hold some reliability issues that will need to be addressed. There isn’t much that isn’t a redesign from Model S/X, so it will be interesting to see how things play out.

    1. georges says:

      @Alan
      So the demo cars had the production drivetrain? If so that’s huge news. Thx for the link.

    2. TomArt says:

      Yes, that makes Musk’s claims go from “insane” to just “crazy, but possible”.

  3. Alan says:

    Not sure if I’m reading this wrong, is Elon saying he is going to produce 500, 000 cars in 2018 ?

    http://www.bloomberg.com/news/articles/2016-05-04/tesla-s-wild-new-forecast-changes-the-trajectory-of-an-entire-industry

    1. Jay Cole says:

      Yes, target for 2018 is ~500,000 sales worldwide, as per conference call expected splits are 60-80% Model 3

      1. Alan says:

        They are going to need a serious injection of cash for this,

        Rights issue on the cards ?

    2. sven says:

      Meh. 500,000 cars per year is small potatoes. During yesterday’s conference call, Elon Musk said that he expects Tesla will produce 1,000,000 cars per year in 2020.

      1. TomArt says:

        Yeah, even I can’t defend that nonsense.

        It would be awesome if they did, and without the QC debacle of the X…

  4. Anderlan says:

    They better tell us which options we need to order to get in the first batches. The calculations on the options versus the remaining rebates are going to get tight.

    1. AP says:

      I’d be guessing less tight. All cars sold within 3-6 months after #200k get the full rebate. If production ramps up this quickly, that could be an awfully large percentage of the American pre-orders.

  5. ffbj says:

    It’s certainly the story of the age. Musk and his companies. The brightest star in the constellation of C-STR-1
    (second technological revolution)
    up there with Bezos, Gates, Jobs,etc…

  6. Spider-Dan says:

    There really isn’t much more to say at this point.

    The only response I can give is that this story is definitely going in my bookmarks, for retrieval on January 1, 2018.

  7. floydboy says:

    Man! Musk ain’t messing around with Model 3!

    1. Anon says:

      *nods* Seems like Tesla just went Plaid…

  8. Four Electrics says:

    Sigh. I really wish Musk would learn to manage expectations, but in this case that is impossible: Musk needs cash, so he has to promise the moon to goose the stock. I think he actually believes it too, which is covenient. Talk is cheap, though, and Tesla’s design and production record is piss poor. It’s funny to see him lecture analysis on how auto manufacturing works, since it’s clear that nobody at Tesla has figured that out.

    1. a-kindred-soul says:

      They’ve just always been late on their own promises, but they always delivered and the product, after some initial corrections, has always been of very good quality.

      In fact it is silly to over-promise on planning, because people will criticise you, while you deliver everything apart from the promised date.

      1. Ocean Railroader says:

        This is the one major flaw I see in Tesla is their expectations. In that as if now I don’t think they are going to have the model three in main stream production in till 2019 or 2020 considering how much of a turkey getting the Model X into production was.

        As for Space X they have gone above my expectations. The reason why is a lot of of 80 year old people in my area who worked in arro space said that it was physically impossible to land a rocket upright.

        Not to mention without Space X there wouldn’t be a manned space program.

        1. theflew says:

          Landing a rocket upright isn’t impossible. It’s just questionable at best. What are the true benefits – reusability. But it weighs more because it has to have enough fuel to land which means it’s payload capacity is less than an equivalent rocket that can’t land. It’s the reason why the Space Shuttle was a glider – didn’t need fuel to land. Read anything on the space shuttle and the biggest changes to it over it’s life was reduced weight to increase cargo carrying capabilities. The design of the Space Shuttle was a good one. The main issue it was designed in the 70’s and was overly complex.

          1. Gerhard Hauer says:

            No it was not a good design. 2 of it many poor design decisions killed 7 people each.

            1. TomArt says:

              It was a brilliant and effective design – flew 135 missions with only two mishaps, enabled everything from the ISS to Hubble repairs/upgrades.

              Furthermore, do not blame whistle-blowing engineers for political decisions.

              1. Anon says:

                To this day, I blame Reagan and his staff for the Challenger Launch…

                1. Phr≡d says:

                  +1 – I heard it from the staff, LO-ong before it became a ‘news’ item:
                  A reference to the launch was included in the State-of-the-Union address and it would have been a Problem to re-write it.
                  I was there, and can glean what the problem was.. (NO 1st-hand knowledge of ok-shuttle-fly in anomaly low, unimagined even in experimental-testing temperatures – ignoring the O-Ring ongoing issue altogether, nothing had Ever launched in sub-freezing temperatures – there was a Reason that we didn’t launch from North Dakota)

          2. Pushmi-Pullyu says:

            theflew said:

            “The design of the Space Shuttle was a good one. The main issue it was designed in the 70’s and was overly complex.”

            The Space Shuttle was arguably the worst design ever for a high-tech vehicle intended to carry human beings. Being overly complex was merely one of its problems. It was designed to be reusable, but in practice wasn’t very. The solid state boosters cost much more to make than intended, and obviously had a flawed design. Recycling the booster stage fuel tank actually cost more than building a new one every time. And the Shuttle itself was so problem-ridden that NASA had to take parts off the last shuttle used, in order to have enough working parts for the next to be launched.

            Part of the problem was that the intended use kept being changed during development, so the Space Shuttle wound up being very much a design by committee.

            (Q: What is a camel?

            A: It’s a horse designed by committee.)

            Much, much more on this subject available in the free e-book linked below, LEO on the Cheap, which is highly recommended reading for anyone interested in the subject. (Click on the “whole publication” link; the link to one of the individual parts gets you a corrupted file.)

            https://web.archive.org/web/20131227042146/http://www.dunnspace.com/leo_on_the_cheap.htm

        2. TomArt says:

          Cannot really compare Model X to 3 – Model X went nuts with new/different ideas and complexity. From Day 1 of Model 3 planning, they were, and are, expressly avoiding those potential pitfalls.

          1. Pushmi-Pullyu says:

            Much as I’m a fan of Tesla Motors, it does not give me confidence that they’ve accomplished the goal of designing a car which is easy to manufacture, when it’s got a huge glass roof and a HUD display in lieu of an actual driver’s instrument panel.

            Looks to me like Elon Musk is literally unable to restrain himself from demanding unnecessarily complex parts and gadgets in all of Tesla’s cars.

            Now, that’s not to say that the Model ≡ can’t be a huge success. I’d say the chances are it will be. But if so, it will almost certainly be despite problems with production… not because of the lack such problems.

            1. TeV says:

              Pushmi-Pullyu:

              Regarding your implication that the HUD will be a component that renders Model 3 complicated to manufacture – as I understand it HUD-based systems are far easier and cheaper to manufacture than comparable DICs. They tend to be small digital displays, projected onto the windshield (of any car, no special materials or lighting needed), with no moving parts.

              I’ve actually got an app on my phone that allows me to project basic DIC info onto my Volt’s windshield if I choose. Certainly not very parts- or tech-intensive!

              Now the panoramic glass roof on the other hand….

        3. Speculawyer says:

          Well, landing a rocket upright back in the 60’s and 70’s was impossible. There have a been a lot of advances in technology since then. GPS, high-speed processors, accurate sensors, accurate servo motors, cheap memory, etc. It would be impossible for a human to land that Falcon rocket like it does. But with tons of accurate sensors, positioning systems, robotic control surfaces, carefully controlled thrusters, and massive processing ability . . . the robot lands itself.

        4. Pushmi-Pullyu says:

          “Not to mention without Space X there wouldn’t be a manned space program.”

          NASA does not currently have a manned space program, and hasn’t since the Space Shuttle was retired. NASA’s planned replacement, the Ares/Constellation vehicle, was so problem-ridden it was cancelled. U.S. astronauts currently have to ride on a Russian rocket to get to orbit.

          SpaceX is currently the best hope for a new NASA manned space vehicle, but they’re still at least a few years away from actually having actual people ride it.

    2. Koenigsegg says:

      Love how you think you know what Elon and Tesla are capable of in 2 years simply by going against what he says because it seems “impossible” to you.

      Thats why Elon is here on this planet. To do the impossible, and he has, MANY TIMES.

      Keep doubting him for whatever reason rofl makes no sense

      1. SparkEV says:

        I don’t know why you think what he’s done as impossible. When it comes to production, it’s matter of scaling. It takes tons of money and right management to do it, but it’s not impossible.

        I’m hoping Tesla to exceed 1M/yr Tesla 3 production first year so that all current reservation holders and more will get the full tax credit. What they’re talking about now is peanuts, and I’m a bit disappointed that their expectation is so low.

    3. Pushmi-Pullyu says:

      Four Electrics said:

      “Sigh. I really wish Musk would learn to manage expectations, but in this case that is impossible: Musk needs cash, so he has to promise the moon to goose the stock.”

      Sigh. I really wish Tesla stock investors would quit using InsideEVs for their megaphone. Not everything Tesla does, or even most of it, is about the stock price. I’m sure Elon isn’t as obsessed with the daily rise and fall of the stock as you and other TSLA short-sellers, Four Electrics.

      Nearly 400,000 reservations at $1000 apiece is a far more solid indication of Tesla’s future than the current stock price, so Tesla has little if any need to pump up the stock price in order to get more favorable borrowing terms. Now, Four Electrics, if you’re suggesting Tesla will issue more stock in order to help finance tooling up to produce the Model ≡, that’s certainly a possibility. But as volatile as TSLA (Tesla’s stock) is, any pumping up will likely be quickly dissipated. So unless Tesla plans to offer new stock soon, your accusation here — just like nearly all of your many, many Tesla bashing posts — will prove entirely unfounded.

      1. sven says:

        Sigh. I really wish Tesla apologists and concern trolls would quit using InsideEVs for their megaphone.

        Look at how Elon pumped up Tesla’s stock in May 2015 before last year’s capital raise with dubious claims of getting 63,000 reservations (later 100,0000 reservations) for Powerwalls/Powerpacks, and of being able to make and deliver 63,000 Powerwalls/Powerpacks by mid-2016. After the capital raise, we learn that the 10 kWh Powerwall was cancelled for lack of demand, and Tesla now says that the PowerWall doesn’t make financial sense for customers in the United States, unless they live in Hawaii. Tesla then said the PowerPack costs $800 per kWh instead of $250 per kWh further dampening any demand. At yesterday’s conference call, Musk said that in the first quarter Tesla Energy sold a paltry 2,500 Powerwalls and nearly 100 Powerpacks.

        So all of Elon’s talk last year of 63,000 unit demand and being able to produce 63,000 Powerwalls/Powerpacks to meet demand was all bullsh*t. Elon was just pumping up Tesla’s stock price for the August 2015 capital raise, just as he is now pumping up Tesla’s stock price with claims that Tesla will be able to produce 100,000 Model 3 in 2017, 500,000 cars in 2018, and 1,000,000 cars in 2020.

        http://www.engadget.com/2016/01/07/study-a-tesla-powerwall-pays-for-itself-after-nearly-40-years/

        1. Rick Danger says:

          Wow, sven has a new bone to chew on, now we will be treated to several posts per article (with accompanying bold type) on his conception of the Great Powerwall Failure.

          1. sven says:

            Rick, why don’t you address the facts: the 10 kWh Powerwall is vaporware, demand for the Powerwall/Powerpack completely evaporated, Tesla is making only fraction of the number that it said it would produce, and now Tesla says that the Powerwall doesn’t make financial sense for most everyone in the U.S. (except Hawaii) and most of the rest of the world.

            Is it that you just want everyone to forget about the “Great Powerwall Failure” (as you put it), and sweep it under the rug as if it never happened?

        2. Anon says:

          Sorry, but one megaphone with an agenda calling another one black, is kinda hypocritical dude…

        3. Pushmi-Pullyu says:

          A serial Tesla basher, physics denier, and “fool cell” car promoter, calling me a “troll”, in a comment thread posted to a website for those interested in EVs.

          Dude, does the term “hypocrite” have any meaning for you? Any at all?

          1. sven says:

            Perhaps you should stop derailing the conversation in every Tesla thread by constantly accusing people of being short sellers. Nobody appointed you the forum police. Once again, you are the first person in the forum section to start with the name calling; it’s your modus operandi.

            What’s the term for someone who has never owned an EV calling someone who owns a Tesla (and has three owned other EVs), a Tesla short seller? The answer is a FOOL.

            FYI, I called you a “concern troll,” not a plain old troll. If you don’t know what that is, then look it up.

            1. Pushmi-Pullyu says:

              sven whinged:

              “Perhaps you should stop derailing the conversation in every Tesla thread by constantly accusing people of being short sellers.”

              Dude, the derailment was when Four Electrics dragged the conversation off into finances, rather than the actual subject of this article. Yet again.

              “Nobody appointed you the forum police.”

              No, apparently that’s your self-appointed job.

              “Once again, you are the first person in the forum section to start with the name calling; it’s your modus operandi.”

              Nope, that would be you, dude. Scroll back and look at what you yourself have written here. Observing that someone is a short-seller and that he has a hidden agenda which is financial, rather than just being a fan of EVs, or merely interested in the subject, isn’t by any stretch of the meaning a pejorative. It’s a neutral statement of fact.

              And you should take that chip off your own shoulder, sven, about being here for a financial reason. Just admit it, already! Why pretend it’s otherwise, when it’s so obvious?

              I’ve seen forums where short-sellers did not engage in FUD, truth-twisting, and repeating lies about the company they were short-selling. Forums where they calmly discussed their investment strategy, without making up or parroting B.S. in order to promote their position.

              So I know it’s possible. Too bad that you and other Tesla short-sellers are apparently incapable of that.

              1. Nichen says:

                Man…the battle between Sven and pushmepushyou rages on. I’m glad you both seem pretty civilized though. And it’s good to do it on the Internet instead of out in the street 🙂

                1. sven says:

                  Were you expecting a scene straight out of West Side Story? 😉

                  1. Phr≡d says:

                    I just Gotta choose Jets..

  9. SparkEV says:

    Only 200K? There goes my tax credit. Not that I was expecting it anyway, but kind of sad to actually know it.

    It’s a long shot, but I wonder if GM (or VW?) could be contracted out to make million or more Tesla 3. Wishful thinking, I know. $7500 of my money gone…

    1. TomArt says:

      Although it is possible, I doubt that they will all be for the US market.

      Also, 200k was his upper limit – 100k was his lower limit. I wouldn’t panic yet.

  10. a-kindred-soul says:

    The world is not just the US. Tesla produces cars for all of us.

  11. pjwood1 says:

    Tax-Credit expiry needs update. Inside EVs was “Q2 2018”. Bloomberg came out hinting that part of the compression in production may be tied to tax-credits being a function of time, NOT VOLUME. Once 200,000 has been hit (across all Teslas sold in US), the amount becomes time constrained.
    http://www.bloomberg.com/news/articles/2016-05-04/tesla-s-wild-new-forecast-changes-the-trajectory-of-an-entire-industry

    Among motives to accelerate is to put as many cars inside the final 6 month window, as possible after the 200k mark. It looks like this mark no lands Q3, or Q4 2017. Correct?

    1. Alan says:

      That’s how I read it,

    2. Speculawyer says:

      The need to extend that credit. Tesla deserves to be rewarded if they pull off the Model 3. Tesla will be a major auto exporter if that Model 3 succeeds.

      1. Nix says:

        There will not be an extension of this credit. It is politically impossible in the current US political climate.

        We will be lucky if the current credit isn’t blocked through budget moves the next time a spending bill needs to go through the Congress and President.

        One of the parties has already stated that as part of their official party budget, that they would end consumers incentives on EV’s, and only fund research.

        There is as much chance that all of Musk’s work will be undermined by political moves as there is of him pulling this off.

        1. evnow says:

          Apparently you have not been paying attention to last few months of Us politics.

  12. Motarra says:

    It is super obvious what’s happening here. He’s pumping us all up for a capital raise which is going to be necessary to build Model 3 in volume by 2018 instead of 2020. I hope they’re successful.

    1. Alaa says:

      So what!
      What will happen to demand when he sells so many cars?

      1. Pushmi-Pullyu says:

        Nobody can do more than guess at the answer to that question, Alaa. None of us here has a working crystal ball.

        I’m sure Tesla would like to know the answer, even more than you. Clearly the demand for the Model ≡ has proven much higher than even Tesla hoped for. But nobody can predict if demand will increase or decrease over time. A lot depends on how well the Model ≡ is received. We can hope it’s as popular with reviewers as the Model S and X, but only time will tell.

  13. Jonathan B says:

    He has to increase production. Otherwise he leaves tax credit money on the table for both his customers and Tesla, via an increase in car price. He either invests lots of money now to ramp up production and maximize the tax credit benefit, or he has to lower the price of cars that miss the cut off and loses money by having to discount them to remain competitive, also without a tax credit a consumer gets fewer options on their cars. You’d rather spend the money now to ramp up production, than give it away on lost revenue later. Furthermore at some point he’ll need to ramp up production anyways.

    1. Pushmi-Pullyu says:

      Jonathan B said:

      “…tax credit money on the table for both his customers and Tesla…”

      That’s an odd way to put it, since Tesla gets not one dime of that tax credit money. It’s certainly true that Tesla benefits indirectly from that tax credit, because the credit lowers the perceived average sale price of Tesla cars, which helps them sell more. But Tesla can’t put any of that tax credit money in the bank.

  14. Trollnonymous says:

    Those numbers are to please those on the list of 400K. That way it sounds like TM is working to get the cars out.

    I highly doubt they will reach those number and I still think the 400K waiting will result in 200K sales. Still a good chunk though.

    1. sven says:

      I wished one of that yesterday one of the analysts would have asked Elon about the conversion rate for Model X reservations and Powerwall/Powerpack reservations. But none of them did.

  15. Kdawg says:

    “This, according to Musk, is how the entire automotive industry works.”
    ———–
    Which is why most auto companies don’t make promises before they are further along. GM secretly ordered all the tooling for the Bolt EV a year before anyone knew it existed. Even after the concept was shown, dates were more reasonable due to “the auto industry”.

    By now though, everyone knows to take Tesla’s projected dates with a grain of salt. Tesla has learned the hard way how this usually works out.

    1. georges says:

      See Alan’s post above. CleanTechnica says that Musk stated that the power train in the Demo cars is the production drive train. If true the design and tooling may be further along than people expect

      1. Kdawg says:

        I’m not too worried about the powertrain, it’s everything else. I know at the reveal’s test rides, people asked the drivers if that was the powertrain and they said yes. However those were all 4WD, where you can get a 2WD version eventually.

        1. sven says:

          If Tesla’s rush to get the Model 3 into production results in them not removing cost out of parts they it will really hit their bottom line since this is a high volume, lower margin car. For instance, if a part ends up costing just $1 more than it would have if Tesla took more time to ramp up production, then that part will cost Tesla in $400,000 in profits assuming Tesla sells 400,000 Model 3 in one year. There’s a reason why bean counters have much sway at auto manufacturers or any high-volume manufacturers in other industries.

          1. Pushmi-Pullyu says:

            Indeed, and this is the main reason why I initially said it’s not realistic to think Tesla can accelerate the production schedule significantly, when Elon reacted to the initial rush of reservations for the Model ≡ by saying (tweeting?) that Tesla would have to seriously think about accelerating the production schedule. And it’s why I’m rather skeptical about Elon’s more recent statements about ramping up production much faster than they had planned.

            Of course, I could be proven wrong, but there is no question that Tesla will have to cut into its Model ≡ profit margin (formerly estimated at 15%) to ramp up production significantly faster than previously planned. It seems to me that it’s unavoidable that the profit margin will take a significant hit in the first year or two, if they actually do go ahead with the accelerated schedule.

            1. sven says:

              CapEx spending does not affect the Model 3’s gross profit margin in any way. CapEx affects cash flow and the balance sheet (debit Property, Plant, & Equipment, and credit cash or credit accounts payable). All construction expenses are converted into Property, Plant, & Equipment assets at the end of the year via adjusting entry, and NO construction expenses are deducted on the income statement whatsoever.

              Gross margin is an income statement item, and is calculated before any operating expenses are deducted.

              1. Pushmi-Pullyu says:

                sven:

                In the post I was responding to, you cited a hypothetical case where a part for the car cost $1 more than it would have if Tesla hadn’t had to rush the car into production. That $1 increased cost would be part of the per-unit cost, and certainly would affect the gross profit margin.

                Quoting from Investopedia: “Gross profit is the profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services. Gross profit will appear on a company’s income statement or can be calculated with this formula: Gross profit = revenue – cost of goods sold.”

                sven, I certainly don’t have the deep knowledge of finances that you do, but I can read a dictionary as well as anyone else.

                1. sven says:

                  When you said: “Tesla will have to cut into its Model ≡ profit margin (formerly estimated at 15%) to ramp up production significantly faster than previously planned,” I thought that you saying Tesla’s increased spending on Capital Expenditures (CapEX) to set up the Model 3 production line would reduce its profit margin. If that is not what you were trying to say, then you have my apologies.

    2. pjwood1 says:

      I hope GM doesn’t have to learn the hard way what showing up Connecticut hearing rooms is doing to Bolt prospects, who may still be wondering about the EV1 thing. Banning Tesla under a “level playing field” meme may go a long way to making those secret tooling orders unnecessary. It gets around:
      http://electrek.co/2016/05/01/tesla-gm-direct-sales-connecticut/

      1. Trollnonymous says:

        IMHO, a level playing field would be to stop the Billion dollars of Oil subsidies.

        GM has no clue which direction to go and how to beat TM. One could say they beat TM to market but many more will say that the first to market on a product is not always the one who finishes on top.

        Besides, the Bolt is an LG product……lol

        1. Pushmi-Pullyu says:

          Trollnonymous said:

          “IMHO, a level playing field would be to stop the Billion dollars of Oil subsidies.”

          A billion dollars? It’s actually many trillions, when you include the spending on military “wars of choice” the U.S. has engaged in, to protect our overseas oil interests.

          How I wish those wars were paid for directly by taxes at the gas pump! That would stimulate the EV revolution very quickly indeed. There would be no need for any income tax rebate for EVs if there was really a level playing field with gasmobiles.

          1. Anon says:

            Best available research from the IMF says 5.3 TRILLION per year, globally. That’s about $10 million dollars a minute.

  16. HVACman says:

    1. Preproduction Bolts have been rolling off the assembly line for over a month, but no retail deliveries will be made for at least 6-7 months. It takes a lot of time to sort out the production bugs, do crash-testing, etc. If Tesla is going to actually be producing Model 3’s for retail delivery by July 1 2017, they have to be in pre-production by this November. That means 100% parts issues sorted out, suppliers, etc.

    Can you imagine Mary Barra saying that the Bolt will be in production in October 2016, then immediately saying “but this date is impossible”, citing expected supplier issues, the “1% parts factor” “it’s just so complex to build a mass-market vehicle” etc. etc.? No. She’d be fired by the board for incompetence. Because GM (and most other auto makers) don’t do business that way. They figure out supply chain, engineering, tooling, parts – 100%, not 99%, schedule the pre-production process, etc. and plan all that in their master product development and production schedule. The process may be new and overwhelmingly complex to Elon and Tesla, but not the rest of the automotive world. Just BAU to them.

    Tesla has shown the world some great ideas, but they also have a lot of lessons to learn. The tuition may be very expensive.

    1. arne-nl says:

      ” they have to be in pre-production by this November. That means 100% parts issues sorted out, suppliers, etc”

      No, for small pre-production numbers you can actually afford to not have all parts & supplier issues ironed out.

      1. theflew says:

        The reason you need suppliers onboard early is for pre production. You don’t use one off pieces for pre production. You use production parts to test assembly, validation, update assembly instructors, crash testing, certification, QC, etc… 11th hour parts are the one’s that will wreck your QC (see Tesla Model X). Integration test vehicles can use one off, hand built parts. GM was testing these types of vehicles last year.

      2. SparkFiatOwner-M3reserved says:

        Yeah, this is the roadster. Preproduction QC needs to start by year’s end if any hope for large production runs to go without hitting a snag and service issues — another reason to rollout in West coast for recalls.

        Can definitely see tesla massage deliveries in NA to make sure hitting 200k US deliveries right at end of quarter and mass US Delivery for next 6 months to max credit timeline.

        Ironically, if rampup of X and S occurs too, this may benefit deliveries overseas of those to slow down the count to 200k

      3. Pushmi-Pullyu says:

        HVACman was entirely correct here. 100%.

        Elon infamously said, a few years back something like (paraphrasing here) ~”When you have a 1% failure rate on making 100 cars a month, it’s no big deal. But when you make 1000 cars a month, it becomes important.”

        I remember reading a reaction from a seasoned pro at one of the bigger auto makers; something about how naive it was for Musk to have said that as if it was something he just discovered; and how big an indication it was of how much Tesla had to learn about volume automobile manufacturing.

        Yeah, Tesla’s habit of rolling even the very first cars off the production line and delivering them to ordinary customers, has resulted in a lot of complaints from early customers. As Tesla matures as a company, it needs to do what the “big boys” do, which is to stockpile cars off the line from a new model for a few months, until they can thoroughly test them and solve as many initial production problems as possible.

        And yes, I realize that practice is going to be difficult if not impossible to reconcile with Tesla’s business model of making cars to order. That doesn’t alter the fact that Tesla needs that extended period of testing actual production cars. There may be no practical solution to that problem, but ignoring the problem won’t make it go away.

      4. MaartenV says:

        The way I understand it, is that at end 2016 the tooling for Model 3 in Fremont will be finished. In the next 6 month pre-production will sort out all the kinks, certify all the parts from suppliers, train all the factory workers etc. etc. etc.

        The in the first part in Q3, all that did not make the deadline will be corrected. Before Q4 real production will start.

        The factory is there, tools are being installed or are ordered, workers are being hired. That makes the California part doable.
        But the GigaFactory, where the cells and batteries must come from, is still bare rock for the most part. How is Tesla going to solve the Nevada part of the equation?

        1. Pushmi-Pullyu says:

          Yes, and since Panasonic is responsible for battery cell production at the Gigafactory, how can Tesla get Panasonic to speed up its timetable for building and tuning production lines?

          Panasonic has proven rather resistant to Tesla’s past attempts to get them to increase battery production faster. That’s why Tesla has been (apparently and probably) production constrained by battery supply for most of the financial quarters since the Model S went into production.

          The only way I can see for Tesla to persuade Panasonic to accelerate the build-out significantly, is to offer them more money. Which, again, will cut into Tesla’s profit margin for the Model ≡.

          Of course, I hope very much to be proven wrong here. But Tesla has to get all its ducks lined up in a row to accelerate the schedule. Every single one. If just one of those ducks falls behind, the entire schedule will be held up.

          Tesla’s history does not give one confidence that they can pull this off.

    2. Speculawyer says:

      Dude, this is Elon Musk. This is the way he works. He sets very optimistic schedules and then works like hard to meet them. Yeah, he often is delayed. But the only way to achieve great things is to try really REALLY hard.

      No one else has been able to build ANY successful electric car company. No one else has landed a rocket on barge floating in the ocean. I agree that chances are they won’t meet those goals. But they’ll be pushing hard, they’ll at least get some out the door, and they’ll keep on improving.

    3. Phr≡d says:

      @ HVACman:
      Not that you’ll see it but +1, well said.

  17. wavelet says:

    “we would aim to produce 100,000 to 200,000 Model 3s in the second half of next year. That’s my expectation right now”

    Yes, that does not sound doable. Even if he thinks it is, I probably would have not said it — this is exactly the type of thing where it’s better to underpromise and overdeliver.

  18. Mister G says:

    GO TESLA GO
    GO ELON GO…
    All the haters can kiss your white rich arse…LOL

  19. Jim Seko says:

    I remember being skeptical of Tesla five years ago but I was obviously wrong. Anyone still posting skepticism about Tesla are probably short sellers or people with a vested interest in fossil fuels