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Expecting Another Model 3 Miss, but Remain Upbeat on Tesla Story
Autonomous Vehicles, Tesla

Next week, likely Jan 2nd or Jan 3rd, Tesla will release delivery and production numbers for the Dec-17 quarter. We estimate Model 3 deliveries will total 2,500 vehicles, below the Street at 5,200. We’re looking for Model S and X deliveries to total 26,600, which is in line with the Street (link to our model here). Separately, the last update on Model 3 production calls for “a production rate of 5,000 Model 3 vehicles per week by late Q1 2018,” which we believe is ambitious.

Tesla’s behind in Model 3 production, but ahead of the competition in building the car of the future. The reason we remain upbeat on the Tesla story despite the prolonged Model 3 production problems is that EV and autonomy are the future. Tesla is fighting to gain production scale to create that future. While other car manufacturers build gas-powered vehicles at scale, building autonomous EVs is a vastly different process that will require traditional auto manufacturers to re-engineer their production facilities. That means every automaker that wants to compete in the future needs to go through the production pain Tesla’s experiencing today.

Model 3 breakout in 2019. While reservation holders grow anxious and investors frustration continues to mount, we continue to stress that production over the next several quarters will be largely a guessing game, and that short-term production numbers do not materially affect the long-term story. We predict a breakout year for the Model 3 in 2019 which means, until then, other elements like solid Model S and X production numbers, increasing energy deployments like the South Australia installation, and future vehicles (Roadster, Semi, Model Y, and pickup truck) will stoke investor optimism.

Fremont flyover shows hundreds of Model 3s. Though it is far from the goal of 5,000 per week, we have seen encouraging signs that Model 3 production is ramping up. Hundreds of Model 3s have been spotted at delivery centers and at the Fremont factory shown in a video here, several suppliers reported that they are back to working with volume in line with Tesla’s guidance of 5,000 vehicles per week, and Model 3 invitations to configure seem to be accelerating. Nonetheless, we encourage bracing for a production miss and further reassurance that bottlenecks are being addressed. More to come the first week in January.

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio.  Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

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