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Tesla Model 3 Production Ramp — Steady as She Goes

If a person were to define the goal of aspiration, not in the dictionary sense, but in the ideal sense, a part of it would include attempting to achieve things that were previously considered impossible.

From the point of view of Tesla, setting seemingly impossible goals and then shooting to attain them has apparently become a new model for doing business. As the old adage goes — shoot for the stars. Go ahead try. If you miss them you might hit the moon instead.

With the Model 3, it appears that Tesla, so far, may have just managed to land on the moon after setting some pretty amazingly ambitious initial star-shot-type goals. That said, the moon, at this point, appears to be a temporary way-station as the company course corrects, but is still aiming for some ridiculously starshot-high production goals through 2018.

According to recent announcements from Tesla, the company achieved 2,425 units of production in the 4th Quarter of 2017. This is a considerable jump from third Quarter production of around 260 Model 3s. It is not, however, anywhere near the 5,000 vehicle per week target by year end that Tesla had initially aimed for. In other words — some moon, but no stars as yet. And it’s obvious that some Tesla watchers are disappointed. Perhaps more frustrating to those of us who are EV lovers, Tesla has again scaled back its targets somewhat — shooting for 2,500 vehicles per week by the end of Q 1 of 2018.

(Ramping Model 3 deliveries in a record 4th Quarter for Tesla. Image source: Electrek.)

But before we leave it at that, let’s add just a little context.

The first bit is that reviews for the Model 3 are coming back as very positive. Even Jalopnik, which regularly tears Tesla a new one, recently complained that there wasn’t enough to criticize about the Model 3. Meanwhile, previous Tesla owners are raving about the car. So some credibility must be given, there, to Musk’s recent claim that the company is aiming for a slower ramp to focus more on quality early and push the mass quantity part back for later. But how much later is still a pretty serious question on everyone’s mind.

The second piece of context that’s worth considering is the fact that as of December, the Model 3 was likely the 5th or 6th best selling EV in the United States. If Tesla manages to achieve an average production rate of around 500 to 1,000 vehicles per week in January, then the car will likely be ranked between 1st and 3rd. By March, if the ramp continues to scale up, it’s likely that the Model 3 will hit over 5,000 monthly sales and be the best-selling EV in the U.S.

(Despite moderate production delays, the Tesla Model 3 continues on its ramp to mass production. As you can see from the above video, fans really love this car. Meanwhile, many analysts don’t see major issues with the present Model 3 ramp and still expect Tesla to be selling north of a million EVs per year by the early 2020s.)

Looking still closer, we should take Tesla’s claims of 750+ vehicle per week production in late December with a dash of salt. It’s clear that Tesla production is now ramping. That bottlenecks are being cleared. That said, this announced sustained rate is the highest yet achieved over a relatively decent period of time. And, if past is any guide, it’s likely that Tesla will be speeding and slowing the line as they address issues. We probably shouldn’t assume that every week from now on will produce 750 or more. It could. But it’s likely we’ll see a kind of two step forward, one step back, two step forward progression as Tesla continues to refine the Model 3 line.

To this point we should probably also add that when Tesla says it is aiming for 2,500 vehicles per week by end of Q1, that’s probably a snapshot of peak production. Not of average weekly production during March. Same for the 5,000 vehicle per week target by June.

It’s a lot to digest. But I think those of us who’ve been following EVs for some time should sit back and take stock of what is a really big achievement underway. It may not be happening as fast as many had hoped. But it is happening. And even with its less ambitious ramp, Tesla appears set to at least double its overall EV production during 2018.

Steady as she goes…

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Global Electrical Vehicle Sales Grew by 63 Percent in the Third Quarter, But Model 3, Leaf, and Bolt Say You Ain’t Seen Nothing Yet

Tesla may still be the industry leader in global electrical vehicle sales. And though a very important player — primarily as a gadfly that’s helping to spur key renewable energy innovation through clean energy business models and competition — this story of a breakout in new energy production isn’t just about Tesla.

During July, August and September of 2017, according to Bloomberg, 287,000 electrical vehicles were sold worldwide. This is some pretty stunning growth equaling 63 percent more than during the same period of 2016 and 23 percent more than during April, May and June of 2017.

Electrical vehicle sales saw broad growth in all major markets. However, China experienced very rapid expansion of EV sales and was the primary driver of such a large jump with 160,000 electrical cars sold there in the 3rd quarter alone. Europe came in second with around 70,000 EV sales with North America following third with more than 55,000 EV sales. Since Bloomberg only tracked these major markets, total global EV sales were likely even higher, particularly when you consider that EV sales in places like Japan, India, other parts of Southeast Asia, and Australia are also on the rise.

China’s incentives aimed at cleaning up dirty air through EV purchases weighed strongly. In addition, pledges by various cities, states and nations to fully transition to electrical vehicles coupled with numerous policy incentives are helping to produce a ground swell of rising EV demand. However, EVs are also increasingly available, lower cost, and feature an expanding array of capabilities that are often competitive with or superior to their global warming producing fossil fuel competitors. And a number of new developments indicate that EV sales will continue to rapidly expand in the near term.

Signs the Model 3 Production Log Jam May Be Starting to Clear, Serious Competition on the Rise

During 2017, primarily on the strength of Model S and X sales, Tesla is the global sales leader for EVs at 73,227 cars sold through September. Chevy, runs a distant 7th with 36,963 EV sales through same period. While BYD, BMW, BAIC, Nissan and Toyota fall 2-6th in the global sales rankings thus far.

In the coming months, Tesla plans to be adding thousands of high-quality, lower cost Model 3s to its trend-setting volume. For 2017, the company is likely to hit near 100,000 sales in total. But if Tesla is able to achieve 5,000 Model 3 per week production by early 2018, that number could more than double in the follow-on year.

Presently, Tesla represents 10 percent of global electrical vehicle sales. And Bloomberg expects 1 million electrical vehicles to be sold globally during 2017. Yet during 2018, vehicles like the Leaf, the Model 3, and Chevy’s Bolt really have the potential to blow the lid off even these far-stronger numbers.

(The 2018 Nissan Leaf sold a pheonomenal 14,000 units during October of 2017. A record setting number of an all-electrical vehicle launch. Image source: Nissan.)

Nissan launched its longer range Leaf on October 1 of 2017 in Japan and Europe. And early reports indicate that sales of this model have just been going gangbusters. In total, 14,000 of the vehicles are reported to have moved in just one month — close to Tesla’s goal of hitting 20,000 per month by early 2018. The 2018 Leaf features a shorter range than the Model 3 (150 miles vs 210 for the base Model 3). But it also has a more attractive base price of 30,000 dollars (5,000 dollars lower than the base Model 3). And though not as zippy or sporty as the Model 3, the Leaf’s new design and 147 horsepower are nothing to shake a stick at. In total, for the same price, Leaf buyers are now getting a far more attractive and capable zero emissions vehicle. And though not in the same class as the Model 3, the Leaf is a serious competitor for those without the extra cash.

Hunger for lower cost EVs was also evident in Chevy’s sales of 2,871 Bolts in the U.S. during October. Though nowhere near the pheonomenal Leaf sales totals, the Bolt is giving Tesla a serious run for its money on its home turf in the U.S. And the high quality, 238 mile range Bolt is certainly a competitor of note. Priced about the same as the Model 3’s base vehicle at around 36,000 dollars, the Bolt is unable to compete on performance in any measure other than range. And its economy styling is certainly less appealing. However, the Bolt is nonetheless capable of capturing serious market share. Probably at least in the range of 30,000 to 50,000 annual sales.

With 500,000 pre-orders, the lower cost, longer range EV market still appears to be the Model 3’s to lose. And with a production ramp struggling to reach 440 vehicles by end October, Tesla looked like it was in a bit of a bind as competitors circled in. Yet some clouds appear to be readying to clear for Tesla as lots swell with Model 3s and the company opens up Model 3 orders to regular reservation holders. An indicator that production may finally be starting to ramp.

Understanding the Context — Sooner or Later, Model 3 Ramp is Imminent

In other words, the fact that Tesla is now transferring reservations into orders is an indicator that Tesla is now more confident in its ability to clear bottle necks and to rapidly ramp production. With a large number of employee pre-orders that need to be completed before it starts to meet regular customer orders, it appears that Tesla may be set to hit in excess of 1,000 Model 3s produced per week sooner than feared. However, we’ve seen hopeful signs of Tesla hitting an early production ramp disappointed before. So this news may just be another false signal.

What do you think? Will Tesla meet new competition coming from Chevy and Nissan by hitting a faster production ramp soon? Or are the Tesla woes of September and October here to stay for at least another few months? Please feel free to provide your take in the comments section below.

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