Tesla communicated production and delivery figures for Q4 2017.
Tesla announced on January 3rd 2018 that it delivered 29,870 vehicles in the fourth quarter of 2017, including 15,200 Model S, 13,120 Model X and 1,550 Model 3. Total production was 24,565 cars, including 2,425 Model 3, a crucial model for the development of the brand into a more mainstream segment. Overall, Tesla delivered 101,312 Model S & Model X in 2017, as well as 1,772 Model 3.
Spectacular buzz
The announcement of the Model 3 compact sedan turned out to be a unprecedented event in the history of automotive marketing. On March 31st 2016, Elon Musk presents the concept of its affordable electric car, Model 3. This the game changer supposed to transform Tesla from a niche manufacturer into a mainstream player in a redefined, disrupted auto market. Buzz is unprecedented. Before the end of the live presentation, online bookings have already reached 115’000 units. On April 7th, Tesla announces that more than 325’000 Model 3 have been reserved. At that moment, Tesla has delivered 122’225 Model S and Model X since the start of production mid 2012 (Roadster excluded).
The flow of reservations does not stop there, but Tesla stops disclosing figures. On May 4th 2016, Elon Musk tells Tesla shareholders that the company has decided to pull-in capital expenditures in order to achieve a production of 500’000 cars (Model S, Model X and Model 3) in 2018. This commitment is reiterated in the shareholder letters dated August 3rd and October 26th 2016.
Broken promises
On February 22nd 2017, the Model 3 program is still “on track” for the start of limited production in July, ramping to 5000 cars a week in the fourth quarter and 10’000 vehicles per week at some point in 2018. The target of half a million cars made in 2018 has implicitly – mathematically – been dropped. At the half year mark, the increase in production capacity morphs gradually from a challenge to a question mark to an outright failure.
On July 3rd 2017, Elon Musk promises:
– 30 cars ready for delivery on July 28th
– 100 cars made in August
– 1,500 cars made in September
The production plan is revised less than a month later. On July 28th, during the presentation of the final Model 3 product, production targets are revised to 1500 weekly units mid October, 3000 weekly units mid November, and 5000 weekly units and of December. Elon Musk presents to enthusiastic crowds a S-curve shaped production ramp plan, but also – oddly – promises his employees “manufacturing hell”.
On August 2nd, repeats the same commitments: “Based on our preparedness at this time, we are confident we can produce just over 1,500 vehicles in Q3, and achieve a run rate of 5,000 vehicles per week by the end of 2017. We also continue to plan on increasing Model 3 production to 10,000 vehicles per week at some point in 2018.”
These plans are revised – again – three months later, on November 1st:
“Based on what we know now, we currently expect to achieve a production rate of 5,000 Model 3 vehicles per week by late Q1 2018, recognizing that our production growth rate is like a stepped exponential, so there can be large forward jumps from one week to the next. […] With respect to the timing for producing 10,000 units per week, it has always been our intention to implement that capacity addition after we have achieved a 5,000 per week run rate.”
The root cause of this postponement is presented as being related to the automated assembly of battery packs, while those used in Model S and Model X are put together manually. Tesla only delivers 222 Model 3 in the third quarter.
Progress toward a solution ?
Tesla provides the following information on production of Model 3:
– In the last seven working days of the [4th] quarter, we made 793 Model 3’s
– in the last few days, we hit a production rate on each of our manufacturing lines that extrapolates to over 1,000 Model 3’s per week
– we made as many Model 3’s since December 9th as we did in the more than four months of Model 3 production up to that point
– we expect to have a slightly more gradual ramp through Q1, likely ending the quarter at a weekly rate of about 2,500 Model 3 vehicles.
– we intend to achieve the 5,000 per week milestone by the end of Q2.
Production targets as revised on November 1st will not be held, far from it. Instead of 5000 weekly units at the end of march 2018, Tesla now expects to achieve only half of that throughput by the end of 1st quarter. The 5000 weekly units target, already postponed from December 2017 to March 2018 two months ago, is delayed again by another 3 months till the beginning of summer 2018. The most concerning pattern is that this elusive goal does not seem any closer as Tesla works through production issues.
Further insights on the nature of production bottlenecks, whether related to battery pack automated assembly at the Gigafactory in Nevada, to vehicle assembly in the Fremont bay area factory or to third party suppliers, will probably be provided at the time of 4th quarter and full year earnings release. Until then, the only certainty is that the half million holders of Model 3 reservations will have to be patient. The only good news in this release is the moderate increase of Model S and Model X deliveries by 9.2% over the previous quarter. Will these news continue to justify the stratospheric valuation of TSLA stock on the NASDAQ ?
Links
Forum topic – Tesla articles – electric and hybrid road tests – the list of road tests – read also:
