Production to increase from 300,000 to 500,000

By the way of answering questions about the expected appreciating value of Tesla cars due to Full Self Driving capability, Elon Musk said that within the next 12 months, the company will produce more than 500,000 cars.

Of course, all of those cars will be hardware ready for fully autonomous driving and according to Tesla, soon the software update will be ready to unleash the capability. Because the update will be available only for cars with the FSD option, the price of those are expected to increase (as well as the option).

"Very much so. There are 2.5B cars & trucks on Earth. Even replacing 1% of that fleet would require making 25M vehicles per year. Tesla will make over 500k cars in next 12 months, but that’s a mere 2% of 25M or 0.02% of global vehicle fleet. Car industry slow -> demand >> supply."

Let's take a look at the production rate - Tesla's 12-months rolling output was at the end of March 2019 at around 297,000, including over 206,000 Tesla Model 3. Sales during the period amounted to about 280,000.

To achieve 500,000 in 12 months, Tesla needs to produce and sell at least 125,000 cars per quarter. The automaker's production record was 86,555 in Q4 2018. In Q1 2019 production was 77,100, including a record 29,950 Model 3.

The increase from almost 300,000 to 500,000+ requires growth of about 67% year-over-year. Assuming that the Model S/Model X will stay at around 100,000 per year, Model 3 production and sales need to double to 400,000 per year.

Tesla Model S/X/3 Deliveries (quarterly) – through March 2019

If Tesla does manage to produce and sell 500,000 per year, and additionally significantly increase the revenues because of the autonomous driving capability, profitability should reach high levels. The FSD option is sold for $5,000 per car and is expected to be priced higher in the near future.

Just 100,000 cars (20% of planned) with the $5,000 option for robot taxi alone would provide $500 million of revenue.

If the production growth and automation is achieved, Tesla also should not have any problems with staying in good shape (in the business perspective) until the Tesla Model Y launch to gain yet another engine of growth.