Tesla Q1 Sales Record Could Be The Calm Before The Model 3 Storm

On Sunday Tesla reported a record 25,418 sales for the first three months of 2017, but this peak may look anticlimactic compared to pending plans for explosive growth.

By any other measure, 25,000-plus sales are a big leap forward, being 69-percent more than the year prior, and consisting of about 13,450 Model S sedans and around 11,550 Model X crossover SUVs. By the half-year mark, Tesla hopes to have doubled this.

But plans for the down-market Model 3 are far more dramatic and a lot is resting on the shoulders of the $35,000-and-up EV with 215-plus miles range.

“Model 3 is the next logical step of Tesla’s ‘secret master plan’ and mission to accelerate the world’s transition to sustainable energy,” says Tesla of a car aimed to project it from boutique luxury carmaker to mass producer overnight.

The Model 3 is to be highly configurable though simpler rear-wheel-drive versions will show up ahead of AWD models to facilitate an expedited rollout to a list of what may be in excess of 500,000 intenders.

An optioned prototype version with glass roof.

At last count a few months ago it was over 400,000 and with news that the car is on schedule, the Model 3 – which will skip “beta” testing and use employees as effective beta testers instead – may have many more lined up for it, and that’s good.

It’s good as Tesla is preparing to push so many cars out the door that it defies belief of some analysts.

“Our Model 3 program is on track to start limited vehicle production in July and to steadily ramp production to exceed 5,000 vehicles per week at some point in the fourth quarter and 10,000 vehicles per week at some point in 2018,” said Tesla’s most recent quarterly letter. “To support accelerating vehicle deliveries and maintain our industry-leading customer satisfaction, we are expanding our retail, Supercharger, and service functions.”

On a conference call, company head Elon Musk projected that by July Model 3s would to be coming off the line at 1,000/week, by August 2,000/week, and by September 4,000/week.

In 2018, he anticipates 500,000 vehicles produced, and by 2020, 1 million.

If this comes to pass, that’s more than 10-times growth over fewer than 80,000 global sales in 2016.

In the process, a crossover variant coined the Model Y is expected based on the Model 3 platform.

Hurdles

“We assume 0 Model 3 deliveries in ’17,” Barclays analyst Brian Johnson wrote in a January 3 note to investors.

Morgan Stanley’s Adam Jonas in a January 19 note said he expected a “soft launch” of the Model 3 to be delayed until late 2017.

And while Tesla disregards those bearish memos, it has otherwise never been on time with a projected launch, nor have new cars ever been bug free, and that was for vehicles costing twice and up what the Model 3 is to sell for.

Musk has hired big league talent to streamline production speed and quality control, but it is otherwise aiming to do a much better job than it has yet with a much bigger volume of vehicles.

A think piece by Wired has said challenges will be compounded beyond quality and safety concerns and will depend also on a relatively stable global supply chain and the Nevada Gigafactory battery plant connection as well.

Tesla also will need to keep the pipeline of buyers full, and a piece by Business Insider postulates some disappointment will come with “a Toyota of Teslas” by those who imagine they’re getting 80-percent of a Model S for 50 percent of the price.

Tesla has not proven overly profitable to date, and while the Model 3 will be quite chic for what it is, something will have to give, suggests Business Insider.

In short, the Model 3 will still be a car, albeit battery powered, and cost cutting will be needed to make it profitable for the car produced in Fremont, Calif.

High Hopes

Tesla has to date defied odds riding a wave of public enthusiasm and forgiving customers, and could probably win a popularity contest hands down next to any legacy carmaker.

That and positive stock market momentum and new investments adding to deep-pocketed existing backers give hope to the prospect of Tesla doing what no carmaker has since Chrysler – succeeding to maturity.

Just last week, China’s Tencent Holdings bought a 5 percent stake in Tesla which speaks of current confidence in Tesla’s gambit. Its $1.78 billion buy in will also help practically in a company that has been known for excessive burning of cash.

But the bottom line will be how well the Model 3 is received.

Assured in the mind of many is it will be in a whole other league beyond the only other EV with its price and range, the Chevy Bolt.

This includes curb appeal, 0-62 mph in under 6 seconds, and the kind of status that a down-market Mercedes or BMW might enjoy.

A lot is yet up in the air for whether Tesla hits the ground running, but so far things appear to be falling into place, and we shall see soon enough.


More Hybrid News...