During the company’s earnings call, Tesla CEO Elon Musk said, “we really are production constrained, not demand constrained.”
This is the key thing that Tesla bears, or anyone trading the stock, should know. According to Musk, the limitation was supply and production, not demand for the vehicles.
He said the main constraint on production has been the cells.
In fact, he pointed out that they had to hold back car deliveries in the U.S. to deliver to Europe.
“U.S. demand or North American demand has continued to increase. We’ve actually had to starve North American demand in order to feed Europe. We’ve had European customers that have been waiting for a long time so we’ve had to constrain deliveries to North America in order to get people their cars, in some cases for two to three years.
“I think we could sustain 20,000 cars a year in North America and maybe more than that. But it doesn’t make sense for us to try to amplify demand if we aren’t able to deliver to that demand. That’ll just make people unhappy.
“Where we are in Europe, we’re in Europe where we were in the U.S. in January or February of this year. It’s on the order of 10,000 units a year. But again it doesn’t make sense for us to drive that demand higher if we aren’t able to meet it. We want to make sure we’re laying the groundwork for future demand increase and I think we can get demand in Europe to be similar to that of North America. That seems pretty achievable to me.”
And this production constraint is spilling into Asia as well.
Musk pointed out that they expect to begin deliveries in China in the first quarter of 2014, probably around February. And again iterated that there was no point trying to drive up demand if they couldn’t meet it.
“I certainly recommend anyone in China who does want to order the car to place their order fairly soon because it looks like that wait time may be accelerating. In other words, the longer you wait, the longer you will have to wait.”
In the Q2 earnings call, Musk had said that Tesla was striving to become demand limited as opposed to production limited.”
“What people still don’t quite get, is that we’re different in that fundamental way from other car companies,” said Musk. “What we spend our time doing here, the management team, is how do we ramp up production faster and obviously maintain good quality and keep improving the product. We expect to alleviate a lot of those production constraints next year.”
Musk has constantly been trying to manage expectations on Tesla. He has previously pointed out that he thinks the stock is overvalued.
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