This S3XY chart shows Tesla’s exponential growth in the making

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Tesla’s production figures for the first quarter 2018 provide some cause for optimism. Could the company be building one million EVs a year by 2022?

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Opportunity:Energy

Tesla’s production figures for the first quarter 2018 were released recently and provided great support to the company’s mission to accelerate the adoption of electric cars.

Elon Musk’s company is under intense pressure as it strives to ramp up production of its first affordable car, the Model 3, which is seen as a game changer as it will appeal to a wide variety of customers, particularly with the forthcoming $35,000 base model.

Production numbers at Tesla’s factories are increasing dramatically with the addition of Model 3 to the line up.

This, together with the expected ramp to full speed production as well as the future Model Y crossover – due to be unveiled later this year – provide a clear indication of how Tesla’s journey to mainstream is quickly reaching a tipping point.

Whilst further models such as the stunning new Roadster or the Tesla Semi truck are on their way and will contribute to Tesla’s revenue, they are unlikely to be making the same sales numbers as the more mainstream passenger car models: the Model S and X, the Model 3 and the upcoming Model Y (a range often referred to as S3XY due to Elon Musk’s original idea behind the model codes).

With a focus on these four models, I have tried to anticipate what Tesla’s production numbers could look like between now and the next six years, when both the affordable Model 3 and Y will be reaching mature stages of production, and new factories are expected to come online outside the US, particularly in China (the most important market by far for electric cars).

It’s safe to say that the road to success is hard to predict and will not necessarily be smooth, as the ongoing ramp of Model 3 production has shown so far.

However Tesla’s historical annual numbers and recent ramp figures – combined with Elon Musk’s very public future goals – provide useful insight when trying to forecast future production ramps, whether it’s new models or new factories coming online.

With Model 3 aiming for 500,000 units produced per year by sometime in 2019 (originally that was supposed to happen this year), it is likely that Model Y will follow a similar trajectory two years down the line, likely to plateau at around the same 500,000 level as Model 3.

The more expensive Model S and X are likely to see growth over time, due to increasing awareness of the Tesla brand and more crucially to the blossoming of yet untapped markets in Europe and Asia.

One particular focus will be China, as a combination of reduced tariffs for foreign cars and the much-talked-about future Tesla plant(s) on Chinese soil could on their own easily pave the way for a doubling of Tesla production in the long term.

I have plotted this separately to show the pattern of production of all four models outside of US factories, and it may include contribution from other plants (in Europe?) yet to be proposed.

Should Tesla deliver on its promises, the young carmaker could boast over 200,000 sales this year, doubling up to 400,000 sales in 2019 as Model 3 increases production.

2020 could see Model 3 reaching maturity and the start of Model Y production in low volumes (I am sure Elon Musk’s target is tighter than this), while I see China – and any other future foreign factories – contributing gradually from 2021 while Model Y ramps up in a similar fashion to Model 3.

2022 may be there year Tesla breaks the 1 million units per year.

We are then in uncharted territory, but we know electric cars will by then have become truly mainstream. The sky is the limit.

An important note is that while the “S3XY” models currently identify the core of Tesla’s offer, we can surely expect future product unveils, perhaps on the lower side of the spectrum (below Model 3?) to further boost numbers and market penetration.

This chart, while seemingly optimistic, could soon prove to be a low growth scenario. Anyone still betting against Tesla?

Source: Opportunity:Energy. Reproduced with permission.

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13 Comments
  1. Charles 2 years ago

    As well as the new Roadster and the Semi, which are mentioned in the article, don’t forget there’s also another entire division to Tesla – the energy/solar side (Powerwalls, Powerpacks, grid-scale batteries, solar panels and solar tiles).

    • Carlo Ombello 2 years ago

      Absolutely! This is just to show how the best known part of the business is likely to grow. The energy business, with the Gigafactory, will probably follow a similarly disruptive trend. Semi also may be able to reach very large numbers and profitability, but harder to predict right now.

    • handbaskets'r'us 2 years ago

      Expect more surprises!
      Musk is no couch potato and has a crack team of dreamers and think-tankers.
      The potential of the Boring Company is huge, for lots of reasons.
      Low orbit gigabit laser internet is coming.
      Somehow I don’t think Elon will be content to rest on his considerable laurels.

  2. Chris Schneider 2 years ago

    I would say the Model Y will not follow the same curve. The X didn’t follow the curve of the S and the Model 3 hasn’t followed the curve of the Model X. The Model Y is also being designed from the model 3. Unlike every other car which was deigned from the ground up the Model Y will shot to full production very quickly! The battery was the biggest bottle neck for the model 3. That will be identical for the Model Y so will not have an issue. It will be the Semi that I think will have the next massive learning curve.

    • Carlo Ombello 2 years ago

      I thought about this too. If Musk learns from his mistakes, and due to shared components and design, Model Y should be a lot smoother. Basically I’ve tried to forecast a safe scenario with new bottlenecks etc, I do think Tesla should beat that chart if plans go smoother, it’s in their own interest. Big question mark is which plants it will use for Model Y, as Fremont is full. Gigafactory expansion in Nevada? Or entirely new plant? The timing is crucial.

      • Chris Schneider 2 years ago

        I think this is a common misconception. 450,000 cars were produced in the factory when ford owned it running a much more manual system. they will have a LOT more space in the factory.

        • Carlo Ombello 2 years ago

          I hope so! They sure have a clear plan on where to do what. Meanwhile Musk is mocking The Economist on Twitter… he probably knows a thing or two.

  3. Andy Saunders 2 years ago

    That’s some pretty brave extrapolation – we’re only a third of the way through the second bar on the graph – and the growth (Model 3) is maybe a tenth of the forecast – 8000-odd of the roughly 100,000 forecast for 2108 (I’m eyeballing the graph). Maybe they can do it, maybe not.

    • Carlo Ombello 2 years ago

      Brave is the right word, indeed it’s really hard to forecast six years and with so much detail that can go wrong. But hey in finance they do it all the time (we know the results!).

      I reckon 2018 and ’19 will be pretty close to my prediction, which only relies on 100k Model 3s this year (can be achieved at current production rate) and 250k next year (if they don’t achieve that it won’t be good). If anything, I feel I may fall short for ’18 / ’19 if Elon pulls the ramp trick, while I rely on Tesla plan execution for the next chapter (reaching beyond 5,000 units per week will be tough).

  4. Robin_Harrison 2 years ago

    That might be a slight underestimate. When they reach 5k/week their production systems are at the copy/paste stage. We could see a huge surge of development, particularly in Nevada. It’s worth noting the usual exponential growth characteristics of all disruptive technologies. The final stages are explosive and Tesla is at the cutting edge of this one.

    • Carlo Ombello 2 years ago

      I do hope to be on the low side for my estimate, which is still a lot. If indeed the Gigafactory will be enabled for car production of M3 and MY then things can quickly explode. My main point is that for many people the chart above will seem unreasonably optimistic, which I think it’s not.

  5. Finn Peacock 2 years ago

    Carlo. I suggest you have a look at Tesla’s balance sheet.

    • Carlo Ombello 2 years ago

      Good point, we’ll see in six months after Q3 results. I may have to edit my chart.

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