Tesla Motors Inc. will produce as many as 200,000 of its Model 3 sedans in the second half of next year, will make more than 80,000 vehicles this year and will reach about 500,000 total by 2018 -- two years sooner than originally planned, Chief Executive Officer Elon Musk said Wednesday during a conference call with analysts.
Annual output for the youngest publicly held U.S automaker by the end of the decade may be as many as a million autos, he said.
The goals are bold, analysts said, considering the hiccups on Tesla's Fremont, Calif., production line.
While Tesla has developed models that attract consumers and inspire investors, that enthusiasm has often led to disappointment as targets and deadlines get pushed back. Now Musk, with about 400,000 Model 3 orders in hand, is accelerating manufacturing timelines to meet demand -- even as the automaker loses two top production executives. The company delivered just 50,658 vehicles in 2015.
"Tesla is hellbent on being the world's best manufacturer. We are trying to get as many [electric vehicles] on the road as possible. What's the limiting factor? It's production of the car," Musk said "We've got to figure out: How do we get supergood at making large, complex objects?"
Musk said Tesla will be adding manufacturing expertise in the coming weeks and will be more stringent about deadlines with suppliers. The company's factory for battery production, under construction east of Reno, Nev., remains on track to make the first battery cells in the fourth quarter of this year. The factory is crucial for the company's emerging Tesla Energy storage business as well as mass-market auto making.
"Increasing production fivefold over the next two years will be challenging and will likely require some additional capital, but this is our goal and we will be working hard to achieve it," Musk said in a letter to investors posted on Tesla's website Wednesday.
In 2018, the auto factory will probably make 100,000 to 150,000 Model S and Model X vehicles and 300,000 to 400,000 Model 3 cars, he said in the conference call. He said it's hard to predict though.
The shares slid $11.03, or 5 percent, to close Thursday at $211.53 after gaining as much as 2.7 percent. They had declined 7.3 percent this year through Wednesday's close.
The company's first-quarter loss, excluding certain items, widened to 57 cents a share, Tesla said in the letter. Analysts on average had estimated a 60-cent loss, according to data compiled by Bloomberg. Revenue, adjusted for lease-related deferrals, rose to $1.6 billion, in line with the $1.61 billion average projection.
"This was hardly the negative quarterly result some were expecting, but we believe bears will key in on the change in tone around 'cash need' or 'capital raise' from the most recent quarterly discussion," said James Albertine of Stifel Nicolaus & Co. in a research note. "That said, we think a capital raise would be completely reasonable in light of higher initial Model 3 demand than expected."
Tesla has been increasing output of the Model X sport utility vehicle after the SUV's rollout was marred by customer complaints about faulty sensors on the falcon-wing doors and by a recall of all 2,700 delivered vehicles because of safety concerns regarding the third-row seats. The company shipped 14,810 vehicles during the first quarter, including about 2,400 Model Xs. Tesla forecasts making 20,000 vehicles in the second quarter and delivering 17,000.
"The Model X problems seem to be in the rearview mirror," said Ben Kallo, an analyst with Robert W. Baird & Co. "Commentary around X and S demand and the production ramp is very positive."
The Model X and the Model S sedan are built on a shared assembly line in Fremont. On March 31, Tesla revealed a prototype of the Model 3, a more affordable car that is slated to reach the market in late 2017. Consumer interest in the Model 3 has been high, with about 400,000 orders at $1,000 each. The overwhelming majority of Model 3 reservation holders -- 93 percent -- are customers new to Tesla as a brand.
Greg Reichow, Tesla's vice president of production and one of its highest-paid executives, and Josh Ensign, vice president of manufacturing, will leave the company. A Tesla spokesman confirmed both departures and said Reichow will remain until his replacement is found.
A person familiar with the situation who isn't authorized to speak about the matter said the executive changes are linked to delays, glitches and the recall that have bedeviled Tesla's Model X. Tesla denied any connection between the departures and production problems with its SUV.
Information for this article was contributed by Tom Randall of Bloomberg News.
Business on 05/06/2016