How on Earth is Tesla Going to Start Producing 500,000 EVs by 2018?

Tesla Fremont EV production

Tesla is a company on a mission. But their global ambitions have put a lot of stress on their production capacity, something that the company is acutely aware of and ramping up quite fast to overcome. Vehicle production during the first quarter of 2017 has increased by 64% compared to a year ago, but at +25,000 units, Tesla is miles away from delivering to the more than 400,000 customers who have made their reservations and are waiting to get their hands on a brand new Tesla Model 3.

Don’t take our statement the wrong way, because Tesla is ramping up quite nicely. From delivering a tad more than ten thousand cars in early 2015, they have grown 2.5X, delivering 25,000 cars during the first quarter of 2017.

But the problem is that, at the current level, Tesla is looking at producing only 100,000 cars, which is nearly 300,000 cars short of what they need to deliver toward their Model 3 reservations. And let’s not forget the Model S and Model X customers who need to be taken care of as well.

It’s a tough problem to solve, but it’s a better problem to have rather than a robust supply with weak demand. In fact, even before it started investing time, effort and money into mass-producing its electric cars, it first created the demand, making sure there was enough of a market to hit the ground running.

At the current rate, which is 2.5 times capacity growth in two years, they’ll need another four years to hit 500,000 cars produced annually.

But Tesla wants to start producing 500,000 cars in 2018 – not in 2021. That means, within the next 24 months, production has to move up by over 75,000 cars every quarter, nearly three times what they have produced during the recent quarter.

Tesla has been acquiring additional facilities in Fremont, and Gigafactory battery production could also ramp up by then, but they’re yet to reach the 500,000 output level at their main Fremont facility, which is what GM and Toyota were making when they owned it. Can they do it in the next year so that 2018 will see 500,000 Tesla Model 3s, Model Ss and Model Xs roll out of Fremont and other locations? Not impossible, but it’s going to be very, very difficult.

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