As per a recent Autoline Daily report, Tesla has the lowest inventory of all automakers in the United States, just three days worth of Model 3 inventory compared to the industry average of around 60 days.

Automakers collectively reported an estimated 4,065,600 unsold vehicles in U.S. inventories on April 1(2018), representing a 69-day supply. – Autonews

Though it’s not clear how Autoline calculated Tesla’s Model 3 inventory, it is not that hard to understand why Tesla will have low Model 3 inventory compared to large US automakers.

Why Tesla will continue to hold low Model 3 inventory?

Tesla is still sitting pretty on top of a massive backlog of Model 3 reservations. Tesla didn’t give us an update on Model 3 reservation numbers when the company released its third quarter production and delivery report. But the company exited the second quarter with nearly 420,000 Model 3 reservations.

“The remaining net Model 3 reservations count at the end of Q2 still stood at roughly 420,000 even though we have now delivered 28,386 Model 3 vehicles to date.” – Tesla Q2 Delivery Report

Unlike other automakers, Tesla is not forecasting short to medium term demand and then starts building Model 3. Neither does the company has the cushion of dealerships to move the cars and hold them there.

Tesla already has Model 3 demand in place, so it wants to build as many cars as possible and deliver them to waiting customers. Tesla reported that the company produced 5,300 Model 3s in the last week of the third quarter.  As long as there is a waitlist for more than 5300 cars, Tesla has zero chance of running its inventory closer to the industry average.

Tesla Model 3 Official Production Statistics Q3 2017 to Q3 2018
Tesla Model 3 Official Production Statistics Q3 2017 to Q3 2018

Model 3: Current demand

Tesla remains tight-lipped about the volume of new Model 3 orders the company is accumulating on a daily basis. In July this year, Tesla dropped its reservation system allowing anyone in North America to order Model 3 by making a $2,500 deposit.

At the time of writing this article, Tesla had a delivery timeline of less than a month for Rear-Wheel Drive Model 3, two to four months for Dual Motor All-Wheel Drive Model 3 and less than two months for the Performance edition.

Tesla is still ramping up: Tesla built 53,329 Model 3s in Q3-18, an average of just over 4,000 units over a 13 week period. The electric car maker wants to increase production rate closer to 10,000 units by the end of this year or early next year.

Responding to a Twitter user’s question about Needham Analyst Downgrading Tesla stock in July, Tesla CEO Elon Musk wrote, “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.”

The Result: Tesla Model 3 delivery timelines have drastically reduced in the last 12 months and it will continue to improve as Tesla keeps chipping away at the backlog while increasing production. Improving delivery timelines will help the company attract new orders, which will keep the company’s day’s supply under check.