Elon Musk: Tesla Model 3 is on track

Posted on February 23, 2017 by Matt Pressman

Yesterday, Tesla [NASDAQ: TSLA] released their fourth quarter earnings to much fanfare. Observers were hoping to get a glimpse into the huge year ahead for the company. The news did not disappoint. What was top-of-mind among investors (and fans alike) was Tesla's production forecast for the Model 3. And it appears to be tracking nicely. In addition, steady growth continues for its Model S and X. And, progress is being made on service and superchargers. Updates also were announced surrounding its energy storage business and integration with SolarCity. There was a lot covered so we'll address different aspects below.

Above: Tesla logo artwork (Instagram: investorsniper)

Financials

Tesla beat Wall Street's estimates and the stock rose in after hours trading. Tesla's shareholder letter* announced “2016 revenue of $7 billion, up 73% from 2015.” For a quick overview, take a look at some key numbers below. And big investments are coming, the letter announced that: "later this year, we expect to finalize locations for Gigafactories 3, 4 and possibly 5 (Gigafactory 2 is the Tesla solar plant in New York)." In response to a question on a possible future capital raise Elon Musk responded, "We are considering a number of options, but I think it probably makes sense to raise capital to reduce risk."

 

Above: Tesla reports their fourth quarter (Table: Daniel Sparks / Motley Fool)

Model 3

In the letter, Tesla 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." Later on the call, Musk revealed that suppliers are being told Model 3 targeted production run rates of 1000/wk in July, 2000/wk in August, and 4000/wk in September. And, he noted that Model 3 production should be up to 5000/wk towards the end of the year.

Above: Model 3 at test track (Image credit: Kyle Field / CleanTechnica)

A Model 3 update from the letter announced that: "Model 3 vehicle development, supply chain and manufacturing are on track to support volume deliveries in the second half of 2017. In early February, we began building Model 3 prototypes as part of our ongoing testing of the vehicle design and manufacturing processes. Initial crash test results have been positive, and all Model 3-related sourcing is on plan to support the start of production in July. Installation of Model 3 manufacturing equipment is underway in Fremont and at Gigafactory 1, where in January, we began production of battery cells for energy storage products, which have the same form-factor as the cells that will be used in Model 3."

Above: Tesla Model 3 drives alongside a SpaceX truck (Image credit: Kyle Field / CleanTechnica)

Musk also reiterated the differences between producing the Model 3 and prior vehicles. He noted that the Model 3 was: "designed for manufacturing" and that it's "considerably simpler." He said the wiring is simplified and there's one screen (in the Model 3) vs. two (in the S and X). He also noted that the Model 3 doesn't have more complex parts like self-presenting door handles or falcon wing doors. But it looks like a Model 3 reveal part deux this Spring is doubtful — the next reveal will more likely occur in July when initial production begins. When asked if the final production version will be better than what was first unveiled, Musk replied that it will be similar but, "better than what was unveiled... I guess in some ways it will be a lot better."

Model S and X

The letter stated solid growth: "In Q4, we received 49% more global net orders for Model S and X combined, compared to the same period in 2015, as both vehicles continue to win over new customers... Despite the complexities of implementing Autopilot hardware on both Model S and Model X, we still produced 77% more vehicles in Q4 2016 than in Q4 2015." Tesla would not provide full year guidance for the company but did forecast that they're focusing guidance, "on the first half of the year. We expect to deliver 47,000 to 50,000 Model S and Model X vehicles combined in the first half of 2017, representing vehicle delivery growth of 61% to 71% compared with the same period last year."

Above: Tesla Model X and Model S in Dubai (Image: CNBC via Tesla)

SolarCity and Tesla Energy

The letter reminded investors that with SolarCity, Tesla plans to, "to reduce customer acquisition costs by cutting advertising spending, selling solar products in Tesla stores, and shifting from leasing to selling solar energy systems. During this transition, we plan to prioritize cash preservation over growth of MW deployed." Regarding the solar roof: "Production is scheduled to begin in Buffalo, N.Y. [later] this year." For the solar and energy storage business, Tesla says they are: "on track to generate $500M in cash (including growth of non-recourse project financing) by 2019 and achieve the cost synergies we committed to upon acquiring SolarCity." Musk added on the call that he feels, " the storage market is going to grow at about twice the rate of the automotive business."

 

Above: The solar roof with Model 3 in the garage next to Powerwall 2 (Image: Tesla)

Tesla Autopilot

The letter noted that at this point, "All Tesla vehicles in production have the hardware necessary for full self-driving." How advanced is Tesla in this area? "Our new Autopilot hardware platform, deployed in Q4 2016, establishes a vehicle technology threshold that is unmatched by any other production car. This new hardware platform, combined with our growing vehicle fleet, means Tesla is collecting more data for autonomous driving than any other company, helping to further accelerate the evolution of Autopilot." Musk admitted, however, that there were some recent software update delays due to issues surrounding the transition away from MobileEye.

Above: Tesla Autopilot in action (Image: Tesla)

Superchargers and Service Centers

The letter added that Tesla plans to, "accelerate expansion of the Supercharger network this year, starting with doubling our number of North American Supercharger locations in 2017." And service is steadily improving: "In Q4, we reduced service backlog in our busiest markets by 25%, and by year end we had increased the number of cars serviced per day by 45% since Q3’16, and by 95% since Q1’16. In fact, we are on track to reduce the global average wait time for vehicle service to less than one day by the end of the first quarter of 2017… [and] we are expanding our mobile repair service that allows Tesla to make vehicle repairs at an owner’s home or office."

 

Above: Tesla service center (Image: Tesla)

Other Announcements

Regarding the possibility of unionization at the Tesla factory, Musk said, "I don't think this is likely to occur." He also announced that Tesla's CFO Jason Wheeler will leave in April and be replaced by former CFO Deepak Ahuja, who rejoins in March on a "long-term basis." And there was another recent acquisition also mentioned — Tesla noted that: "Grohmann Engineering is a world leader in highly automated methods of manufacturing, and this acquisition launches Tesla Advanced Automation Germany, which will help us innovate manufacturing processes to be used initially in Model 3 production."

TSLA 4Q 2016 Earnings: Full Audio Recording

 

===

*Source: Tesla 

Posted in Elon Musk, Tesla, tesla news, TSLA


Next

Previous

Join over 18,000 Tesla fans, enter your email to subscribe:

Tesla E-Book: Free Chapter

Please Confirm You've Read Our Terms

Before we add your item to your cart, we need to confirm you have read and agree with our:

Links will open in new window.

Yes, I Agree. Add to Cart!

No, Please Cancel