Tesla races to fulfill its Model 3 promise

Can Elon Musk finally live up to one of his big promises for Tesla’s Model 3?

The electric car maker’s first mass production vehicle has fallen short of ambitious production targets. After missing two previous production goals, Musk has told investors the company will be making 5,000 Model 3s per week by about this time of year.


Tesla races to fulfill its Model 3 promise
Tesla races to fulfill its Model 3 promise

He originally promised Tesla (TSLA) would be building 5,000 Model 3s per week by the end of 2017. The company made 800 in the final week of the year.

Then he scaled back the promise, saying Tesla would be making 2,500 a week by the end of the first quarter, on its way to building 5,000 a week by the end of June. It fell short of that target as well, building 2,020 in the seven days before its April 3 report on production levels.

The production targets are more than just a matter of pride; they’re crucial for Tesla to become profitable on a sustained basis.

Tesla has a waiting list of about a half a million customers who have put down $1,000 deposits to buy a Model 3. But it ended the first quarter having delivered fewer than 10,000 of the cars. Tesla is giving some people who put down deposits the chance to order the options for their cars — but they will have to pay an additional $2,500 towards the purchase price in order to do so. And they still aren’t getting a firm date for when their car will be ready.

It has only reported two profitable quarters in eight years as a public company, and it has enough debt to pay back later this year that critics worry it would face a cash crunch. It may have to borrow a lot more money or sell additional shares to fund its operations.

Moody’s, which downgraded its credit deeper into junk bond status earlier this year, estimates Tesla will need to raise as much as $2 billion — even if the company hits its target.

But Musk has continued to insist that he’ll hit the target of 5,000 Model 3s a week, and that will give the company enoughsales and profit to make it unnecessary to raise more cash.

Some analysts believe he’ll hit the 5,000 goal. But Goldman Sachs analyst David Tamberrino, who has a sell recommendation on the stock, questioned whether Tesla would be able to sustain that level production.

Tesla did not respond to a request for comment on its current production status.

The company built an extra assembly line under a huge tent outside the company’s Fremont, California, factory.

No standard automotive solution could be built in time, so we created a new solution. It is working & has slightly higher quality than the more traditional general assembly line. Perhaps most surprising is that the total cost of production in the Sprung tent is lower.

— Elon Musk (@elonmusk) June 27, 2018

The massive tent where Tesla is operating a new assembly line to build the promised number of Model 3 cars.

Musk has been essentially living at Tesla’s factories — the Fremont plant where cars are assembled, and the Nevada “Gigafactory” which builds the lithium ion batteries to power the cars. A recent Wall Street Journal interview with himdescribed him wearing the same Tesla t-shirt for three straight days and sleeping under his desk.



He’s had a contentious few months at Tesla — sparring with stock analysts on the most recent investor call in May, vowing to create a new service to rate the credibility of media outlets he believes are treating him unfairly, and mocking critics on Wall Street who question whether he would finally meet the goals to justify the stock’s lofty valuations.

For a while it seemed as if investors had finally fallen out of love with Musk and Tesla. After reaching a record high last September, the stock lost about a third of its value, falling to a 52-week low in April, just ahead of its report on Model 3 production. But Musk’s assurances that production was on track and that the company would finally be profitable in the second half of this year helped bring back the value of the stock. Shares have regained more than three-quarters of their lost value.


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