By on April 3, 2018

Tesla Model 3, Image: Tesla

You’ve probably heard of the Ford Model T before — perhaps in a book or on Tumblr or something. Brainchild of auto pioneer Henry Ford, the Model T (introduced in late 1908) revolutionized the use of the assembly line for mass production five years later. Between 1912 and 1917, annual Model T production soared from 68,711 vehicles to 735,020.

Why am I mentioning a car that’s over a century old? Well, it’s because Tesla, in all of its its exuberance, decided to namedrop the Model T in its first-quarter 2018 production report. Apparently, we might be looking at the next one.

Of the 34,494 Tesla vehicles built in Fremont, California over the first three months of 2018, some 9,766 were Model 3s. In the fourth quarter of 2017, Tesla built 2,425 Model 3s. However, Tesla claims some 2,020 of the compact electric sedans came to be in the last seven days, meaning roughly one-fifth of its Model 3 output came during an eleventh-hour, all-stops-pulled production push at Fremont — which reportedly saw volunteers from other model lines switch over to Model 3 assembly.

2,020 vehicles, if you recall, is nearly 500 vehicles per week less than Tesla’s Q1 2018 Model 3 production target. After Model 3 production began last summer, the automaker pushed back its 5,000 per week target twice — from the end of 2017, to the end of Q1 2018, and then to the end of June, where it still stands.

Separating the past week from the rest of Q1, Fremont cranked out 7,746 Model 3s over the course of roughly 12 weeks. Using simple division, that equals a weekly production rate in the mid-600s. Admittedly, this paints an imprecise picture of the plant’s output, but Tesla isn’t in the habit of publicizing weekly production figures. Thus, it’s difficult to gauge the ramp-up approaching the end of Q1.

tesla-model-3

Despite missing its already diminished target and achieving its production rate only through the use of non-dedicated Model 3 workers, Tesla is glowing. Boastful, even.

“The Model 3 output increased exponentially, representing a fourfold increase over last quarter,” the automaker said in a Tuesday release. “This is the fastest growth of any automotive company in the modern era. If this rate of growth continues, it will exceed even that of Ford and the Model T.”

We’ll let history bear this prediction out. Tesla claims it overcame “production and supply chain bottlenecks, including several short factory shutdowns” during this hectic period, and fully expects to build 2,000 Model 3s over the next seven days.

“Given the progress made thus far and upcoming actions for further capacity improvement, we expect that the Model 3 production rate will climb rapidly through Q2,” the automaker stated. “Tesla continues to target a production rate of approximately 5,000 units per week in about three months, laying the groundwork for Q3 to have the long-sought ideal combination of high volume, good gross margin and strong positive operating cash flow.”

Hold on a minute — the Q2 target now contains an “approximately” and an “about.” It seems this target, while not receding like in has the past, has just grown fuzzier.

In terms of Model S and X output, Q1 2018 saw production top that of Q4 2017 by 11.7 percent.

The release of production data comes after a week that saw Tesla’s stock price drop precipitously, the recall of 123,000 older Model S cars for a power steering issue, and the admission that a California man died after his Model X crashed while cruising on Autopilot. Since the start of Tuesday trading, Tesla’s stock price is up about 4 percent.

Late Monday brought a report, based on two sources close to the company, that CEO Elon Musk had taken direct control of the company’s production division. The Information claimed Musk took over from Doug Field, the automaker’s senior vice president of engineering, in this role. Musk wasn’t too happy about the story.

 

[Images: Tesla]

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36 Comments on “Hitting the Ramp: Tesla Misses First-quarter Model 3 Production Target...”


  • avatar
    theBrandler

    I’m waiting for this shell game that is Tesla to fall apart. Many other manufacturers make more cars in a month than Tesla has made in 10 years, and yet Tesla is valued in the tens of billions of $$$?

    I don’t know if Tesla will go belly-up or just experience a severe expectations correction at some point, but one thing is for certain, Musk will keep his billions, long after the after-glow of Tesla has faded into the history books.

    There is no more profitable career path than being the hype man of a politically and fanboy charged gravy-train.

    • 0 avatar
      tylanner

      The only shell game here involves moving cars and the only meaningful competition is themselves.

      Tesla has fulfilled the public’s demand for practical EVs and is continuing to do so as quickly as they can…this is a demand that the other manufacturers have failed to address. They will likely never catch-up to Tesla and the palpable malaise present at recent international auto shows is just the natural product of the other manufacturers monumental lack of foresight, stagnant power-train development and complacency.

      If they had spent more of their profound ingenuity on meeting federal emissions standards with innovative technology instead of semantics and technicalities they’d at least have a fighting chance.

      • 0 avatar
        indi500fan

        “They will likely never catch-up to Tesla”

        Or some would say “Tesla will likely never catch up to the top automakers in manufacturing capability”

    • 0 avatar
      brandloyalty

      Musk is the largest holder of Tesla shares. Almost 40 million. So he has skin in the game. And so if Tesla tanks, he does not “get to keep his billions”.

      And Tesla does a lot besides making cars.

  • avatar
    sirwired

    “exponentially” I do not think that word means what he thinks it means.

    And who, precisely, is he trying to fool here? Neglecting his other production lines in order to artificially boost production for a single week out of the entire quarter is not what people refer to when they say that production has been “ramped up”. It’d be like K-Mart boasting they are on track to be the Biggest Retailer of All Time because that’s what it extrapolates to if you pretend the sales the week before X-Mas are applicable to the whole year.

    And I’m sure all this emergency shuffling is doing wonders for Tesla’s product quality, already not exactly causing Toyota to drool with envy.

    And, Elon, your job as CEO is help the company grow as a whole; if you, personally, are needed to oversee production of a single model, you aren’t doing all the other things you are supposed to be doing. And, by the way, it’s highly likely there are lots of people that know way more about the mass-production of cars than you.

    • 0 avatar
      FreedMike

      “And I’m sure all this emergency shuffling is doing wonders for Tesla’s product quality, already not exactly causing Toyota to drool with envy.”

      This. Car and Driver finally got its’ hands on a Model 3 (via a Model 3 owner who bought it in Colorado and relocated it to Michigan), and found no shortage of build-quality issues.

      But apparently the thing is a solid driver.

    • 0 avatar
      SCE to AUX

      @sirwired:

      Agreed on your summary. Giving the factory an enema in the last week of Q1 doesn’t say much for quality or having truly addressed bottlenecks.

      And, as I’ve said here before, I believe Mr Musk has micromanaged a very talented group of auto engineers into doing things his way. Sure, there is benefit to taking risks and short-cutting red tape, but not *everything* – like sound engineering due diligence – should be cast aside.

      All the frenzy and drama at Tesla is just one reason I cancelled my Model 3 reservation.

    • 0 avatar
      NoID

      That’s the beauty of using the term “exponential” to describe growth. As long as you don’t specify what the exponent is, nobody can call you out.

      Exponent of one? Well that there is linear.

      Exponent less than one? Yeah, it’s growing, but the rate of growth is decaying.

      Exponent of zero? That one is really fun, because it’s just 1.

      Math doesn’t lie, but it’s very handy for obfuscation…

  • avatar
    FreedMike

    I think the endgame here is that Tesla takes part in some kind of Nissan/Renault style mash-up, or gets swallowed up by another carmaker. And that’d make sense – clearly there’s design and engineering talent here, but they aren’t good at actually building the cars.

    And the company I’d see them most likely to end hitched to is…Ford.

    Think about it. Tesla gets manufacturing talent, and Ford ends up with real product for its’ electro-mobility-whatever plan that they’re cobbling together. Shareholders of both companies rejoice.

    • 0 avatar
      stingray65

      So why doesn’t Tesla do a share swap deal and buy Ford since they were until very recently the “bigger” company in terms of market cap? It would be very similar to America Online using its inflated share price to buy Time Inc., which worked out extremely well for both parties (not).

      • 0 avatar
        FreedMike

        Probably because everyone recalls the very deal you’re talking about.

        But I’d say Tesla makes a pretty tempting takeover target for a company that wants to be an instant player in electric cars. Given the purchase price, though, I bet they end up in some kind of joint venture instead.

        Either way, I don’t see the company staying 100% independent. And I don’t think that was ever the plan.

        • 0 avatar
          DevilsRotary86

          My money is on them being bought out by an ambitious Chinese company with deep pockets. BYD comes to mind as a possiblity.

        • 0 avatar
          stingray65

          Buying Tesla at anything like its recent price would be like buying an upper floor in the World Trade Center on 9/10.

          • 0 avatar
            FreedMike

            It depends. If the buyer can come in immediately and fix the production issues, then Tesla basically becomes a turnkey electric car company with an established and desirable product line, and a built-in distribution and service network.

            But if the buyer’s a newbie, then, yeah, it’s going to be more of the same.

          • 0 avatar
            CarnotCycle

            At present valuation Tesla not worth trouble of corporate hook-up.

            Tesla open-sources their IP; and the critical tech of an electric car is the battery – which is Panasonic if I remember. Throw in possibility of UAW re-appearing at Fremont (talk about diluting an asset’s value) and there isn’t much to Tesla beyond the ambigious ‘goodwill’ of the brand and possibly the Gigagfactory.

            At one fifth TSLA’s current price that’s still $8 billion. That’s kinda pricey even after the assumed 80% discount IMHO.

  • avatar
    EBFlex

    “”Right now, tho, better to divide & conquer, so I’m back to sleeping at factory. Car biz is hell … “”

    BS hes sleeping at the factory. This guy is a liar. And no, you dolt, the car business is not “hell”. But you need to have a decent idea as to what you are doing, which you clearly do not.

    “My job as CEO is to focus on what’s most critical, which is currently Model 3 production.”

    Since when? Throughout all of the Model 3 production you were wasting time by doing publicity stunts like playing with rockets or begging for more money by showing off future vaporware products or playing with a flame thrower.

  • avatar
    stingray65

    As the Model T production ramped up, Henry cut the price from $590 in 1912 to $500 in 1917, an inflation adjusted drop of almost 33%. Does Elon’s comparison with the T also mean we will see $24,000 (without subsidy) Model 3s soon?

    • 0 avatar
      sirwired

      Given that we haven’t seen the $36k version yet would tend to point to “No”.

      (According to Car and Driver, the lowest price of a Model 3 you can actually purchase today is $50k. The “$36k” version is just a fiction in a brochure you cannot buy if your number comes up in the reservation queue.

    • 0 avatar
      FreedMike

      Yep. Totally.

  • avatar
    CarnotCycle

    Tesla really in a race with cash situation here making Model 3’s. The magic number nobody knows is what gross margin on a freshly-stamped Model 3 is (after deducting the already-spent deposit). If they can gross 10% cash on Model 3 that’s roughly ~$4000 a car x 2000 = $8 million a week in fresh cash flow. If they can stamp 3000 cars a week that’s $12 million. Between cash-burn and cash-on-hand they need to dredge something around that number in new cash per week by late spring or its gonna get existential for them by the fall. If Tesla ‘only’ netting $2000 in cash flow per Model 3, that could be a problem.

    My prediction is one more capital-raising facility at least announced before Q3.

    • 0 avatar
      jonnyanalog

      Since they pulled volunteers off of other lines to get the numbers the QC will surely suffer. You can’t expect these guys to come in green and know the ins and outs of an entirely different model. What I’m getting at is if they hit their numbers but QC sucks it’s all for naught. Warranty costs will play a factor in these cars which, if high enough, could erase much of the profit. I like Tesla, I really do, but this is a sham led by one of the biggest carpet baggers since the Great Sergio.

  • avatar

    “Does Elon’s comparison with the T also mean we will see $24,000 (without subsidy) Model 3s soon?”

    That’s a big not-gonna-happen dot com.

    Sir Elon of Musk has bitten off more than he can chew in the never-ending effort to stroke the public into investing in his company.

    Wall Street is finally waking up from its stupor on this one.

  • avatar
    incautious

    The clock it ticking. Preston Tucker, Malcolm Bricklin, and John Delorean all got to this stage of designing, and actually building their vision. All ran out of money at this point With 10 Billion in debt and the $7500 tax credit about to expire on all Tesla’s around this July, It’s not a rose y picture that’s for sure. Names like Packard, Cord,Duesenberg, Studebaker, Oldsmobile, Plymouth ,Mercury , on and on have all disappeared. Musk get kudos for having got this far, but the competition is catching up and now they have the $7500 tax advantage and much deeper pockets.

    • 0 avatar
      SCE to AUX

      “Preston Tucker, Malcolm Bricklin, and John Delorean all got to this stage of designing, and actually building their vision.”

      Hardly.

      Those three combined produced less than 12,000 vehicles in their total history. Tesla has produced over 250k in 10 years, in a highly regulated and intensely competitive environment, employing over 35k people in two factories.

      Reasons abound for the failure of those other companies you mentioned, but I’ll add another – Scion. Even Toyota couldn’t make that dud work for much more than 10 years (and the Scion I had was excellent, BTW).

      So while I can’t paint a rosy picture of Tesla’ financial situation, I do wonder if they are now “too big to fail”, and investors will simply keep them afloat at any cost.

  • avatar
    I_like_stuff

    Tesla is up 6% today. A fool and his money are soon parted…..

  • avatar
    indi500fan

    Elon channels Al Haig: “As of now, I am in control here at Fremont”

  • avatar
    SCE to AUX

    FWIW, although the Model 3 production numbers missed Tesla’s sky-high estimate, it is still the best-selling EV in the US in 2018 – by far.

    https://insideevs.com/monthly-plug-in-sales-scorecard/

    #1: Model 3 – 8180
    #2: Model S – 5300
    #3: Model X – 4500
    #4: Bolt – 4375
    #5: Leaf – 2545

    Of these, only the Model 3 and Leaf stand to climb a lot this year.

    • 0 avatar
      CarnotCycle

      For what its worth I wandered over to a Jimmy John’s for lunch and sure enough shiny black Model 3 at drive-thru. Caught Model 3 at light and gunned motor a little looking to see if we’d find out what a Model 3 could do but he wasn’t game. Dang it!

      But a good anecdote for Tesla to actually see one in wild for first time in two weeks though.

      • 0 avatar
        SCE to AUX

        With a 0-60 of ~4.8 seconds, it’s probably quicker than what you’re driving, or nearly anybody else for that matter.

        When I finally see one for the first time, I’m sure I’ll feel a twinge of sorrow for cancelling my reservation.

        • 0 avatar
          CarnotCycle

          “…With a 0-60 of ~4.8 seconds, it’s probably quicker than what you’re driving, or nearly anybody else for that matter.”

          Got an E60 M5 6spd manual about two weeks into exciting world of ESS supercharging. It will walk a Model 3 I guarantee you and so far I’ve only been able to blow doors off a Model S from rolling start ~50mph already on an on-ramp – a stock M5 could do that already. Wanna pick one off at a stoplight, that’s next Tesla-mission.

    • 0 avatar
      indi500fan

      Congrats to them for being 1-2-3 in class.

      BTW total Tesla for March = 43% of Ram pickup sales (in units).

    • 0 avatar
      jkross22

      Of the 3 companies on this list, how many have turned a profit in 2 consecutive quarters?

      As is, Tesla is cooked. Those institutional investors are going to want their money back, and will likely be the ones pressing Musk into a partnership or sale.

  • avatar
    grrr

    Comparison to the Model T is remarkably valid given Musk’s penchant for automation in production.

    Henry Ford presumed that the Model T would not require a successor, and had standardised and automated the production of the Model T to such a point that the per-unit cost was exceptionally low; however, the costs of the tooling and machinery would take forever to amortise, and moreover, his plants where not designed to allow changes in the slightest, hence the massive cost to introduce the new-fangled Model A.

    The same applies to Tesla, who will also be out-run by more agile competition in due course; especially while they are re-learning lessons learnt by the rest of the industry years ago.

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