The $35,000 standard battery Model 3 is by far the most anticipated EV of all time, not just for Tesla. Touted as the car that will break the already osteoporotic ICE backbone of the auto industry, the cheapest Model 3 represents everything traditional auto makers are afraid of – not autonomous transportation, but the EV of the century: the $35,000 Model 3.

After a recent (end of August) visit to Tesla’s Gigafactory 1 in Nevada where the Model 3’s batteries are made, analysts from Worm Capital, which holds about $166.7 million worth of Tesla stock, have revealed what they saw and heard. The write-up was revelational, but the note that stuck out the most was this:

“Tesla will likely start producing the shorter-range Model 3 in the next eight months. Right now, they are focused on selling higher-margin cars where demand continues to exceed what is being produced.”

We’ve said before that Tesla won’t be focusing on the lower-priced Model 3 right now because it needs to chase margins until it can show consistent profitability over Q3- and Q4-18. We surmised that the base Model 3 would come sometime during the first half of 2019, and it looks like that estimate was spot on. May is the middle of the second quarter, so a production start in May means deliveries starting in June 2019.

What this timeline also implies is that it will give Tesla enough time to ramp to 7,000 to 8,000 cars a week at Fremont. At that level their annualized run rate will be between 364,000 and 416,000, which means they can move much faster on fulfilling current reservations, which at last count was at around 420,000.

Let’s not forget that new orders will also have piled up by then, so Tesla actually needs to stretch beyond that goal and aim for 10,000 Model 3s a week, which will give them a 520,000 run rate for the subsequent 12-month period.

Only after Tesla reaches that production point will they even think of making and selling a $35,000 Model 3. That’s when margins will have stabilized and the company will have some leeway with pricing. We also need to keep in mind that Gigafactory 1 is only running at about 30% capacity right now. The smaller 50 kWh batteries that go into the base Model 3 will most likely need their own production lines, which means Gigafactory 1 will need to expand its output capacity before production can start.

All of these factors seem to enmesh perfectly with each other, which is why a Q2-19 release for the Model 3 Standard Range Battery seems realistic.


Source: Worm Capital