Model S at Tesla HQ

Model S at Tesla HQ

At the 2014 NAIAS, Tesla Motors announced it had sold 6,900 Model S sedans in the 4th quarter of 2013.  That figure is an all-time high for Model S sales in a single quarter, but soon Tesla will be manufacturing the Model X and then Gen III too.

With three vehicles rolling down the production line, it seems possible that Tesla could run into some battery cell supply problems.

However, some analysts believe Tesla won't be constrained by cell production.

Wedbush’s Craig Irwin and Min Xu stated:

"We believe the recent constraints that Panasonic’s available production capacity have presented are likely to be resolved by 2H14 when shuttered capacity is likely to be re-commissioned to produce batteries for Tesla. The cost-out roadmap of a mid- to high-single-digit percent reduction in annual battery costs should support a continued tailwind for 2014 Model S gross margins."

So, by the second half of 2014, production capacity issues at Panasonic will be sorted out, says the analysts who add:

"We see strong positives in Tesla’s credible path to longer-term battery cost reduction and the Gen-III vehicle target costs, and what we believe will be a receptive buying public willing to purchase EV’s while retaining reasonable expectations for these vehicles. Tesla’s multi-year lead over credible competition suggests the company is well positioned to deliver an aggressive volume ramp."

However, we see cell production issues reforming when Gen III launches.  The only way Tesla will be able to prevent constraints is with the opening of its announced battery "giga" factory.  This factory could well be the only way that Gen III gets the cells it needs to be sold at Tesla's targeted level of ~100,000 unit per year.

Bring on the giga factory.

Source: Barrons

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