Tesla Keeps Cranking up Model 3. In Sight of 6000 Units Per Week

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I wish everyone would really give a hard time to those analysts who kept saying that Tesla will not be able to sustain its production rate after the company reported that they have built 5,031 Model 3s in the last week of June.

Maybe they were correct in a way because Tesla is not building 5,000 Model 3s anymore. They are very close to building 6,000 units every week, data from Bloomberg Tracker shows.

 

Since Bloomberg’s tracker is dependent on Tesla’s VIN registration pace, it will keep changing weekly figures on a moment’s notice, but normalizes over time. As you can see from the chart, if the current pace of VIN registration continues Tesla will soon start building 6,000 Model 3s every week.

The Two Assembly Lines

And it’s possible because of two reasons. GA4 inside a Tent and GA3.

“We expect that GA3 alone can reach a production rate of 5,000 Model 3s per week soon, but GA4 helped to get us there faster and will also help to exceed that rate,” Tesla said in a statement released on July 2.

Tesla built a new assembly line – GA4 – because it became clear that GA3 would not reach the 5000 Model 3s per week target by the end of June. Tesla crossed the 5,000 per week milestone with the help of newly built GA4.

But with both assembly lines functioning for the last several weeks, Tesla is cranking up the volume. By the time you read this article Bloomberg Tracker may have either changed the numbers upwards or even downwards. But it will not make much of a difference because Tesla has already registered more than 20K Model 3 VINs in the first two weeks of August, nearly the same amount they registered during the four weeks in July.

Demand is Still Robust

Tesla CEO Elon Musk confirmed in July that new reservations are continuing to flow towards the company. He said “Dunno where this bs is coming from. Who knows about the future, but last week we had over 2000 S/X and 5000 Model 3 *new* net orders”. (20 Jul 2018)

A backlog in the order of hundreds of thousands, coupled with new orders flowing in, gives Tesla enough reason to crank up Model 3 production volume as much as it can. The more the merrier.

Overseas Deliveries

Tesla sells Model S and Model X in nearly thirty countries. Every country where it has sold a Tesla is a potential market for Model 3. VIN registrations in the last few weeks clearly indicate a product mix of (nearly) 70% Dual Motor AWD and the rest Performance edition and RWD. If Tesla starts off by launching Performance in overseas markets, the company will be able to improve its average selling price and boost its margins, further helping its quest to launch the $35,000 standard battery version of Model 3.

Will Tesla go over 6,000 units per week?

For a very long time Elon Musk has been talking about the 5,000 units per week goal. But in April he said in order to achieve a sustainable production rate of 5,000 units per week, the company needs to increase its capacity to 6,000 units. His reasoning – with so many moving parts within the supply chain, the higher the max capacity goes away from 5,000 units, the easier it will be to achieve the 5,000 target repeatedly.

So, I think Tesla may take its foot off the accelerator after it hits 6,000 + units, but if the demand keeps coming, as Elon indicated in July, there is a good chance for Tesla to keep improving production incrementally after crossing 6,000 units per week.

In the second quarter 2018 shareholder letter CEO Elon Musk and CFO Deepak Ahuja wrote, “We aim to increase production to 10,000 Model 3s per week as fast as we
can. We believe that the majority of Tesla’s production lines will be ready to
produce at this rate by end of this year, but we will still have to increase
capacity in certain places and we will need our suppliers to meet this as well.
As a result, we expect to hit this rate sometime next year.”

Tesla has kept the option open to further ramp up production and get close to 10,000 Model 3s/week by the end of 2018. Considering the way they moved from building 793 units during the last week of December to 5,031 units by the last week June. I wouldn’t bet against the company and say that they will not reach 10,000 units per week by the end of December 2018.

It depends on one single factor: how many new orders the company is accumulating every week.