Sure but the huge response nevertheless caused Tesla to reconsider its whole approach to how much demand there would be and consequently how much extra capital they would need to meet the demand. And now it looks like Tesla will be producing Model 3's in three factories world wide.
You can be sure that GM and Ford are taking these numbers very seriously if only because the Tesla truck is offering compelling utility and a very reasonable price aside from the controversial design.
When you read through the announcement and you realize that this is a company that even if it doubled it's current production rate it would still have orders for the close to a year's production, then you have got to pause and be amazed.
How many Model 3s could Tesla produce at its current facilities? 7,000? 10,000? 15,000? It wouldn't be enough to remotely satisfy the demand.
Truth is that once delivery picks up, more people will start to order since currently people like me think it's pointless to order a car that you would have to wait a year to get and that - in most parts of the world - you can actually not order yet. The orders are likely to increase proportionate to the production capacity as Model 3 will be made available around the world.
This company could build 3 Giga Factories around the world that each produce 10,000 Model 3s per week and demand would still not be met. Heck, they could have 10 Giga Factories and they might still not satisfy demand for Model 3.
And then there is the future demand for Model Y and - once they get economy of scale and battery prices go down a bit - demand for cheaper, smaller cars.
All this demand could be met by other car manufacturers if they too produced long range EVs of similar or better quality than combustion engine cars. But no-one does and no-one will for an other year. Don't say Nissan Leaf; it's not long range. And when they finally do, in 2-3 years or so, are you going to take a chance on one of the first competitive EVs from VW, Mercedes, BMW, Ford, General Motors, Hyundai, Fiat, Toyota or Mazda or are you just gonna stick with Tesla, which by then comes with even better specs than today?
Tesla is the Apple of the car world. There is still room for other producers to make the Android cars that spend 3-4 year playing the catch up game of being one-two models behind in specs, and then maybe finally catch up in 5-10 years. But Tesla will get the better customers and the fat margins if the traditionalists don't hurry. And hurry a lot.
> For Musk to hit all of his targets, Tesla would need to build about 430,000 Model 3s by the end of next year. That’s more than all of the electric cars sold planet-wide last year.
> Even if half of the Model 3 inventory shipped to other countries, 2 U.S. sales under Musk’s targets would outpace the BMW 3 Series and the Mercedes C class—combined.
> To sell that many $35,000 sedans in the U.S. “would be absolutely unprecedented based on what we know about car markets today and how people spend their dollars,” said Salim Morsy, electric car analyst at Bloomberg New Energy Finance. “It could happen. I’m pretty sure it won’t.”
If they could pull this off this might be a great investment by Tencent.
It's also great for the car industry and environment as well. Especially considering their work on automated driving. If they get that many cars on the road it would give them a ton of data and a big advantage/lead in AI over other companies. But it could also be setting the bar too high and setting them up for failure (even though they might otherwise have nailed targets).
Regardless, as a design fan it would be interesting to see so many Teslas on the road. They are great looking cars.
I doubt that Tesla needs much more demand at the moment. The demand for Model 3 already exceeds Tesla's production capacity. Until the Chinese Giga Factory 3 is up and producing large numbers, Tesla cannot use an increase in demand for much. Next year, Giga Factory 3 will be producing significant numbers, but that may still only be sufficient to meet the demand from the Chinese market.
So Tesla will likely have to build a Giga Factory 4 in Europe or America to really meet the Western demands. Such factory, which is still not formally announced, needs to be built first and will not produce large numbers until 3-4 years from now.
Apart from the obvious production constraints, Tesla has the constraint of expanding the supercharger network and the constraint of expanding their workshops, so that they can service the huge amount of new cars on the roads.
The Model 3 seems like it was premature. It gets mediocre reviews ( https://www.caranddriver.com/tesla/model-3 ), they have 180,000 orders, and they're fulfilling them at about 3200 a month, i.e. 4.6 years to satisfy the current backlog. For scale, Toyota sold about 32,000 Camrys a month last year just in the US. Heck, BMW sold about 34,000 3-series a month.
Tesla should have stuck to high-end markets. It looks like their foray into mass production will end badly.
So, when will Tesla be manufacturing 2,500,000 cars per year?
Edit: No, really. Ford sold over a million vans, pickups and heavy trucks last year, a market that Tesla has no apparent interest in entering.[1] The Toyota Camry alone sold 428,000 in 2014, the Honda Accord 328,000, the Corolla 340,000, the Ford Fusion 306,000, the Nissan Altima 336,000, and the Honda Civic 326,000.[2] The Tesla Model 3 will presumably be in that latter market (although those are roughly $10,000 cheaper), and if Musk is right about scaling his factory to 500,000/year, it will take a big chunk of it (but still, it's $10,000 more). (If it's in the BMW 3-series/Merc. C-class/Lexus range, 500,000/year would eat all of that market.)
Tesla has received about 400,000 pre-orders for the Model 3 in the span of one month. Mass-market demand for the car is no longer a question. But their ability to execute on these production plans is a different story. Time will tell...
"The automaker had been guiding a production of 50,000 to 55,000 Model 3 vehicles for the third quarter.
According to a reliable source familiar with Tesla’s production, the automaker had a strong week of production and managed to bring the total number Model 3 produced to over 51,000 vehicles."
For your comment below "folks are buying enough Teslas to support the production capacity of Tesla" ... that only means that Tesla is not producing more then what they can sell?
(Note: I posted my reply above because HN/dang won't let me post a reply below)
They're setting up a factory that is planned to produce 5000 cars a week.
It's only produced about 500 Model 3 cars total so far. Total, not per week. The financial press is getting worried.[1] Tesla has very serious production problems. They thought they could bring up a high-volume production line much faster than the big auto companies do. They can't.
Tesla might end up being acquired by some company that knows how to run an auto plant.
Well OK, yes, I kindof missed your "mass market" specifier. Tesla have only shipped a few thousand Model 3's so far. But they have 400,000 reservations that they intend to fulfil in the next 24 months or so. And that's a big challenge to everyone else.
> Several months ago this would have been unthinkable
Unthinkable? Their Q4-16 Shareholder letter [1] (Feb 22nd, 2017) stated: "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."
On July 2nd, 2017 Musk forecasted [2] 20,000 per month by December '17.
> Ignoring the 2000/week spurt last week, the other 7000 Model 3 cars were made over the course of 11 weeks
Exactly. The 2000 number is complete B.S. They just held back nearly finished units and the "completed" them all in the last week so they could release a semi-decent number without technically lying, but they are nowhere close to target.
"Q1 deliveries totaled 29,980 vehicles, of which 11,730 were Model S, 10,070 were Model X, and 8,180 were Model 3"
Model S/X: -23% deliveries. That is a BIG problem. Falling demand for S/X and inability to sell at sticker price (where they still lose money) and replacing that with another model that they lose even more money on is not a great "growth" story.
Model 3 production is absolutely critical and Tesla's future is in real danger.
The future of Tesla is completely tied to the high production volumes of Model 3 at this point. The debt is piling up and rated as junk.
The low production goal 2500 was missed by 20 percent and it's not even certain if they can keep it up for a week at this point. Their November 2017 target was 5000 per week at this point.
The production will face new problems that are more expensive to fix when they ramp up the volume more. Producing 5000/week six months from now is
in jeopardy. If they miss that, Model 3 will be the last car Tesla produces with Musk in charge.
On the other hand, I actually believe Tesla is right to prioritize scaling production for their existing Model 3 / Y demand. Their problem is not generating more demand (things like Cybertruck, Roadster, etc.) but in producing the supply for existing demand. They've always been short on that, for good reason (hard to scale production fast, huge organic demand).
Production issues are only one part of the Model 3 problem, however. The car doesn’t seem to be in as high demand as Chief Executive Elon Musk once promised investors. Analysts at Bernstein said in a research note last week that fewer than 30% of customers who have been invited to take delivery of the Model 3 have actually done so.
And Tesla can’t simply cut spending to solve its cash challenge if it hopes to ramp up production. The company has racked up about $10 billion in long- term debt and has $23 billion in total liabilities. To survive long term, Tesla needs to stop overpromising and to scale back its ambitions to goals it actually can achieve. Right now, though, it just needs more money.
That’s a killer, if customers are starting to lose interest, thst much debt along with only having enough runway for another year is death.
Realistically, what can they do other than go deeper into debt? Sell?
It comes from Barclay's analysis (they are very bearish).
Model 3 is not small volume luxury car as previous models. They are investing wast sums for large scale production. Burning trough vast amounts of cash is OK only as long as the production volume ramp up really happens in limited time frame and quality and recall numbers are similar to Audi 4A.
Tesla must ramp up the production volume within a year or Tesla is financially in the ropes.
If Tesla pays back debt $1000 for every car it sells. It must sell 4 million cars to pay this year's projected cash burn. Tesla made a bet that it can become large car manufacturer with Model 3, there will be no second changes.
You can be sure that GM and Ford are taking these numbers very seriously if only because the Tesla truck is offering compelling utility and a very reasonable price aside from the controversial design.
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