Musk Says the Company’s “Real” Now; Analysts Say Not Yet

Good travels fast. The Quarter (April-June) had barely closed when Elon Musk was tweeting out that “We did it!!“—meaning the had hit its target rate of 5,000 cars per week. In an internal email obtained by Bloomberg News, Musk elaborated, after a few bad puns, that “I think we just became a real car company…”

Today, Tesla announced it actual production and sales numbers for the quarter and most analysts commented, in so many words—not so fast. Tesla built 28,578 Model 3s for the quarter and delivered 18,440 to customers. Both numbers were records and impressive numbers for an EV or a start-up car company, but not necessarily in line to get to the production goal of 200,000 units–or even 100,000 units–per year. Analysts were quick to point out that Tesla has only built  

Tesla Model 3

One year since the start of production, still waiting for the affordable model

Before they got those 5,000 Model 3s built in the final week of the quarter, Tesla air freighted in an additional assembly line, set up in a makeshift tent; had full week-long shutdowns of the assembly line; saw its CEO sleeping under his desk—all to average less than 1,500 sales per week for the quarter. The excess cars produced as in transit to customers, according to Tesla. Musk comes out of the software industry where such practices are known as “stuffing the channel.” It’s no different than the end-of-month sales at dealerships everywhere, except that those are to register actual sales, not shipments.

Tesla Looks Forward

Tesla points forward, saying this is just the start of a ramp up to 6,000 units per week of production and cash flow positive quarters through the end of the year. Many automotive analysts are skeptical and question whether the company has proved it can sustain high-volume production.

Production of the Model 3 Dual-Motor All-Wheel Drive and Duel-Motor All-Wheel Drive Performance models also began this past month, adding to the complexity of the assembly line, but also adding two models with higher potential revenue for the company.

Tesla also made the interesting move of opening up Model 3 configurations to all U.S. and Canadian reservation holders. If even a small portion of the reported 420,000 reservation holders followed through and sent in their $2,500 non-refundable deposits, it would mean a substantial cash injection for the company. When those folks would get their cars remains an open question, though most have patiently waited up to two years at this point with only glimmers of a future delivery date.   

On its website Tesla estimates delivery of the Performance models in tow-four months and delivery of the Long Range Dual-Motor All-Wheel Drive and Long Range Rear-Wheel Drive models in three-to-five months. Standard Battery models (those designed to retail at the advertised “affordable” price of $35,000 are promised in six-to-nine months. It’s not clear how these relatively short-term dates give with the announced 420,000 reservations. Even at 6,000 units per week, Tesla could only produce 200,000+ Model 3s in a nine-month period. It remains to be seen how much of this “news” is aimed at the stock market, and how much is actually designed for customers.

Overshadowed by Model 3 number discussion were the delivery numbers for the Model S sedan and Model X SUV. For the quarter, Tesla said 10,930 Model S were delivered and 11,370 Model X found customers. Tesla doesn’t break out sales by region so it’s not clear how many of these were U.S. sales.

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