Tesla moves its 500,000 cars-a-year production target forward to 2018

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Tesla responds to overwhelming demand for Model 3 by moving 2020 target to produce 500,000 vehicles a year forward to 2018.

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Tesla just released its quarterly shareholder letter. The first item is a whopper: the company aims to move its 2020 target to produce 500,000 vehicles a year to 2018.

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Tesla Model 3 @ Unveiling Event | Image Credit: Kyle Field, for CleanTechnica

Obviously, this is in response to the insanely (nay, ludicrously) high demand for the Tesla Model 3 (up to 400,000 reservations weeks ago, before Elon stopped updating us). If there’s the demand, there’s a way to achieve it, right?

As many commenters here on CleanTechnica and people Kyle and I talked to at the Tesla Model 3 unveiling said (the EVAnnex dudes, for example), with banks, investors, and Panasonic seeing how strong demand for the Model 3 is, Tesla should have no shortage obtaining more financing and agreements to increase battery and vehicle production further.

There have already been several signs that Tesla is aiming a much faster ramp, but that is now crystal clear thanks to the shareholder letter.

Other news this week (that we haven’t yet had time to cover in detail) that hinted at this was that Tesla just nabbed a huge warehouse lease in Livermore, near its Fremont factory — “just over 1 million square feet, or more than 17 football fields.” Yep, that had Model 3 fingerprints all over it.

Another tidbit that could be related to the ramp or could be related to the Model X production problems (or could be related to other matters altogether) is that two of Tesla’s production chiefs are on their way out — “Greg Reichow, Tesla’s vice president of production and one of its highest-paid executives, and Josh Ensign, vice president of manufacturing, will leave the company. A Tesla spokesperson confirmed both departures and said Reichow will remain until his replacement is found.”  One would think that has more to do with the ongoing Model X production problems, but who knows, maybe there’s a difference of opinion regarding the challenge of ramping up to 500,000 vehicles a year by 2018. Can I emphasize that target strongly enough?

Naturally, there’s a bit of a “he said, she said” going on with these departures, and we don’t have enough insight to pick a side, but here’s another quote from that Bloomberg piece: “A person familiar with the situation who isn’t authorized to speak about the matter said the executive changes are linked to delays, glitches, and a recall that have bedeviled Tesla’s Model X. Tesla denied any connection between the departures and production problems with its SUV. ‘This is not about the Model X,’ said a Tesla spokesperson. ‘After being at Tesla for over five years and leading its production team for the past three years, Greg Reichow has announced his intention to take a leave of absence from Tesla so that he can have a well-earned break.’”

Reichow made nearly $6.4 million in cash, stock, & options in 2014 + 2015, so I’m sure it wasn’t a lighthearted decision however it came about. And one could certainly see that the burnout from the past several years left him ready for a vacation rather than a daunting production task. I’m sure Tesla won’t have trouble finding a replacement, though. (Edit: Notably, Reichow’s LinkedIn profile shows no prior experience in the automotive world ahead of Tesla, but over 7 years at SunPower.)


Back to the Tesla shareholder letter, here’s the opening paragraph:

“The overwhelming demand for Model 3 confirms that compelling all-electric vehicles have mass-market appeal. In the first week of taking deposits for Model 3, we received more than 325,000 reservations despite no advertising or paid endorsements. This implies about $14 billion in future sales, making the Model 3 introduction the biggest consumer product launch ever. Since then, reservations have continued to grow to surpass even our expectations. With Model 3, our mission of accelerating the transition to sustainable transportation is more achievable than ever.”

I’ll update this article as I get further into the letter, or I’ll write new articles if it seems warranted. But my big take-home is the same as I repeated many times on Model 3 unveiling night: The conventional automakers (BMW, Mercedes, GM, etc) must be panicking and/or crying right now.

Full Disclosure: I’m long TSLA. Very long TSLA. My articles are not aimed at affecting the TSLA stock price and I’ve been writing in the same way about Tesla for long before I was a stockholder. Just sayin’.

This article was originally published on Cleantechnica, re-produced with permission.

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8 Comments
  1. chris seaborn 3 years ago

    I wonder how many pre-orders Tesla would receive if they produced a car for the ‘normal’ wage earner. The mind boggles! Sadly, with such large orders for the, still too expensive, model S, this could be years off. Perhaps the Chinese will do it, although it seems they also are out for the big price ticket models.

    • nakedChimp 3 years ago

      Currently the costs of a 200 mile nice looking car with expected features is still in the range of 50.000+ AUD – you just cant have it RIGHT NOW.
      Tesla stated time and time again they work their way from the top of the market down to Joe average that want’s to have his 200 mile nice looking normal feature car for 20.000 AUD.
      But this is only possible with scale and TIME.
      It takes TIME to get there.
      Just be patient and act like an adult, not like a spoiled brat.

      PS: If you want a 20.000 AUD BEV for a normal wage earner you can get one now.. but it won’t drive 200 miles, nor will it look and have features like a normal car has.

    • john 3 years ago

      That is exactly what it appears is going to happen once the huge number of Model 3 cars are bedded down there is hint of this in his talk in Norway where he mentions a more moderate model.
      My guess is somewhere in the $20 k area.
      Link to teslaelonmusk scroll down the page to link to video.
      http://elonmusknews.org/

      Elon Musk says Tesla’s next-gen Model 4 will be affordable for everyone

      Quote from interview.
      “With something like the Model 3, it’s designed such that roughly half the people can afford the car,” he continued. “With fourth generation and smaller cars and what not, we’ll ultimately be in the position where almost everyone will be able to afford the car.” While Musk did not offer a time frame for when a follow-on vehicle to the Model 3 would be available, he said the fourth generation (Model 4) vehicle would be even less expensive.

      • chris seaborn 3 years ago

        Thanks for the info John, and the polite way you’ve replied to my post.I hadn’t read those comments from Elon Musk.
        $20 k area? That would be fantastic. Getting the masses into EVs would head pollution levels in the right direction … downwards, if, of course they could be recharged from clean sources.

        • john 3 years ago

          Thank you
          the link i gave may be helpful trust it is I try always not to be some know all and put people down that is just not nice or how i would prefer to be treated.
          Here is a very interesting development from a top annalist who has resign the job specifically to be able to invest in Tesla.
          http://evobsession.com/leading-tesla-analyst-drops-wall-street-investing-tesla/

          I have a fear that perhaps GM may decide to sell their vehicle at a $5000 loss to try to undermine Tesla it would only cost them $500 million. Perhaps even that is too much for the company to swallow and would only lessen sales of the Model 3 by 100,000 out of 400,000, however if it stopped the take up of those left it would cause Tesla huge financial structural problems. Just remember in business companies are absolutely ruthless toward new start companies and try to send them broke or buy them out as soon as possible.

          • john 3 years ago

            I have had personal experience with this, just research what happened to Argyle Diamonds. The company had 1 billion in store of mainly industrial diamonds a very small share holder base, however even then they had sufficient blue diamonds to challenge De Beers, who control the market and could independently market their own very sought after product what happened?
            A takeover off which was just above the market value. Needless to say the outcome was a compulsory buy out order to my small shareholding as the get rich quick people took the easy money now only a month ago one diamond was sold for $42 million dollars how pathetic of those who just buy and sell shares of companies that only have a few against their true value.
            This was the best buy Rio Tinto ever made they got a company with the biggest diamond pipe in the world for peanuts and more than half the worth was sitting in a warehouse.

  2. chris seaborn 3 years ago

    Sorry, correction. I meant of course the Tesla model 3!

  3. Ian 3 years ago

    I would suggest the main reason Tesla start from the top of the market and then towards the bottom, has to do more with lithium batteries. A top of the range car does not have much more in the way of KWH energy storage relative to price than a bottom of the range vehicle . Leather seats and a fancy engine are cheaper than lithium batteries. They can maximise the positive features of electric vehicles , namely acceleration and smoothness of ride and minimise the negative namely expensive batteries, poor range in a large luxury car. As they get the price of batteries down they can start to move down the product range. Less value added with the luxuries and more competitiveness with the drive train. It’s a battle doing the Moore’s law thing and hopefully Tesla can pull it off .

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