- As the first quarter draws to a close, numerous Tesla watchers are trying to figure out how many Model 3 vehicles the company is making.
- By the end of the second quarter, Tesla is supposed to be making 5,000 Model 3’s per week, but current estimations predict that Tesla will fall well short of that target.
- Ultimately, it doesn’t matter much. Tesla is still among the most valuable car companies in the world.
A cottage industry has lately arisen in Tesla Model 3 Kremlinology.
Bloomberg has created a “Tesla Model 3 Tracker,” and according to that publication’s Tom Randall, numerous other Tesla obsessives have concocted elaborate and borderline unethical systems to hack their way into the true numbers.
Tesla says it will be building 5,000 Model 3 vehicles each week by the end of the second quarter. The first quarter is about two weeks from closing, and shortly after that Tesla will update an eager world in Model 3 deliveries for the first three months of the year.
Weekly production is supposed to be 2,500 per week by the end of March, but Bloomberg reckons the number is less than 1,000.
This is hardly shocking. The entire Model 3 rollout has been, to put it mildly, a mess. But so what? The Model S rollout wasn’t exactly perfect, and the first six months of Model X SUV production introduced the Teslarati to Elon Musk’s favourite term – “production hell” – and found the CEO sleeping on the floor of his Fremont, CA factory.
Musk once said that Tesla would be selling 500,000 vehicles by the end of 2018. The Model 3 would have accounted for roughly 400,000 of that ambitious total (Model S and X assembly is likely capped at around 100,000 annually). I’m happy to be proven wrong here, but I don’t think Tesla is going to make it.
The markets are shrugging off all of Tesla’s bad news
The markets don’t care: Tesla is trading at well over $US300 per share and has a $US55-billion market cap, despite incinerating $US3.5 billion last year and posting zero yearly profits for 14 years. If you look at Tesla’s balance sheet, you could argue that the company is worth exactly zero. But investors are convinced that the carmaker will vindicate its lofty value, and so the party goes on.
Musk’s personal stock has never been higher.
In February, Musk sent his own Tesla Roadster into space, atop a huge rocket built by his other company, SpaceX. And this month, Tesla shareholders will vote on a pay package that predicts a $US650-billion future market cap for the company.
There’s nothing rational here, so spying on Tesla’s Model 3 tally makes about as much sense as shorting the stock.
Of course, the company shouldn’t be worth as much as General Motors. And of course Model 3 production will miss targets. But, Tesla occupies parallel reality. We should just get used to it.
Even if Model 3 production targets of 5,000 per week get pushed back to Q3 or Q4, what’s the worst that could happen? The markets saw a few billion off the company’s value? Then it’s only worth more than Ford and Fiat Chrysler Automobiles. Plus, a lot of folks would see that as a buying opportunity.
Here’s what’s likely going to happen: Tesla is going to hit something like 1,000 per week in Model 3 output in Q2. It will be lucky to get to 5,000 by the very end of the year. It will still deliver 100,000 Model S and Model X vehicles in 2018. Total production for the year will be on the order of 150,000-200,000. Optimistically, a quarter of the current Model 3 reservation holders will get their car (it’s a nice car, too, for the record).
Tesla overestimated its capabilities
The bottom line is that it’s time to stop the madness with this endless parsing of Tesla’s capabilities. The company bit off way more than it could chew with the Model 3. End of story. Any rational investor can see that and is thereby empowered to stay the course or bail out. Morgan Stanley’s Adam Jonas, a Tesla bull, recently advocated for some prudent profit-taking.
Customers holding Model 3 reservations might turn on Tesla, but I doubt it. The brand’s gravity is simply too strong. And it’s not like they don’t have plenty of other cars to buy while they wait.
Tesla is, therefore, something close to perfectly irrational. It’s like Pi or infinity: baffling, but there, incontrovertibly. The Model 3 is the extremely local example: I’ve never seen a vehicle with this much hype take this long to hit the streets at scale. Even noted automotive travesties such as the Edsel were briskly produced and delivered to market; Ford sold over 100,000 in the two years that the ill-fated car was manufactured.
I’ve also never seen anybody literally guess at how many of a particular vehicle an automaker is producing. This is largely because the automakers will basically tell you, via monthly sales reports. Tesla doesn’t tell, quite simply, because it doesn’t want people to know.
That’s how Tesla rolls. A pretty significant number of people think that whether Tesla makes 10,000 Model 3’s in Q1 or a lot less than that, the company is going to triumph no matter what.
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