Tesla delivered 1,500 Model 3s to customers last quarter, says production numbers on target

Key Points
  • After several delays, Tesla is under the gun to ramp production and deliveries of its Model 3 sedans this year.
  • In a letter to shareholders, the company reiterated that it is on target to produce 2,500 Model 3s per week by the end of the first quarter.
A lot of instances of progress for Tesla: Analyst
A lot of instances of progress for Tesla: Analyst

Tesla reiterated in its earnings report on Wednesday that it is on target to produce 2,500 of its Model 3 electric sedans per week by the end of Q1 and 5,000 per week by the end of Q2.

Tesla's future as a mass-market carmaker hinges on automated production of the Model 3, which more than 400,000 people have already reserved, paying $1,000 refundable fees to do so.

The company had to delay mass production of its Model 3s several times and cautioned investors today:

"Model 3 ramp has demonstrated the difficulty of accurately forecasting specific production rates at specific points in time. What we can say with confidence is that we are taking many actions to systematically address bottlenecks and add capacity in places like the battery module line where we have experienced constraints, and these actions should result in our production rate significantly increasing during the rest of Q1 and through Q2."

On the company's earnings call, CEO Elon Musk noted that Tesla is learning from its production challenges.

"How do we design out all the pain that we are currently going through? We do not want to experience it again," he said. "I mean I was in the factory, I was in the Gigafactory on Thanksgiving Day, were many other Tesla people, it was like hardcore."

Despite analysts' repeated questions on the Wednesday earnings call, Tesla executives did not provide hard numbers, including a current weekly production rate of Model 3s.

Tesla employees told CNBC they did not expect the company would be able to hit its revised production goals in 2018, citing ongoing challenges at the Gigafactory where Model 3 batteries are made.

The company previously reported that it produced 2,425 Model 3 sedans during the fourth quarter of 2017, and delivered 1,550 of those to customers in the same quarter. Today it slightly adjusted the number delivered to 1,542 for the quarter.

The cost of automotive revenue is climbing for Tesla. In the quarter ending 2017, automotive cost of revenue rose to $2.19 billion, up from $1.93 billion the preceding quarter, and up 31 percent from $1.66 billion in the first quarter of 2017.

The Model 3 numbers aren't a surprise — Tesla issued a "Vehicle Production and Deliveries" update in January stating that it had delivered 1,550 Model 3s to customers in the fourth quarter of 2017, and had another 860 en route to them. In total, the company said it had produced 2,425 Model 3s in the fourth quarter.

The Model 3 sedan was first announced by CEO Elon Musk in March 2016. Musk said in July last year that Tesla would probably be making 20,000 Model 3s per month by December 2017.

In January this year, Tesla braced investors for a much lower production and delivery rate of Model 3s. Tesla then said it should be producing 2,500 Model 3s weekly by the end of the first quarter of this year, and 5,000 Model 3s weekly by June. It reiterated that guidance in its earnings report.

More than 400,000 people have placed $1,000 refundable reservations for Model 3s to date.

Tesla shares ended slightly down after hours.

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