Extremely strong demand for Tesla’s Model 3 – a $35,000 sedan unveiled in March and meant to be Tesla’s first mainstream auto that has booked more than 400,000 pre-orders – is partly behind the production ramp up.
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But for Musk, this is about meeting red-hot demand for Tesla’s vehicles, including the moderately priced Model 3.
“It’s better to say like our 2020 target for volume is closer to maybe close to 1 million vehicles in 2020 or something like that”, he said during the company’s earnings call.
Tesla has only produced about 110,000 vehicles in its less than ten-year history, now it plans to churn out half a million cars a year.
Musk also admonished Wall Street not to compare production of the Model 3 to the troubled production of the Model X SUV, saying, “It’s always tempting for people to reason by analogy instead of first principles”. It expects second-quarter deliveries of about 17,000 vehicles, below analysts’ forecasts for almost 19,500, according to StreetAccount.
The Model 3 has a base price of $35,000, but Tesla expects that options would bring the average per-car price to more than $40,000.
Still, Musk admitted that an internal goal to begin Model 3 production on July 1, 2017, “is not a date that will actually be met”. These executives are Greg Reichow and Josh Ensign, Production and Manufacturing Vice President respectively. After all, its model 3 sedan had received nearly 400,000 pre-orders just three weeks after being unveiled on March 31.
Investors have raised questions about Tesla’s ability to meet ambitious production targets for Model 3 cars after repeated bumps in the ramp-up of production of the Model X. He will remain at Tesla until a successor is found, Tesla said.
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He said that the Model X – with its gull-wing doors and free-standing rear seats – is much more complicated than the Model 3, so industry watchers should not assume the company would have similar production problems. After the quarterly report was announced Tesla stock climbed five percent to $234.20 during the late trading hours. That’s up from 50,000 vehicles in 2015. The CEO also expressed interest in setting up assembly lines in Europe in China after maximizing production at its Fremont plant, to satisfy Tesla demand more efficiently in these regions.
