Tesla May Build 200,000 Model 3 Cars By End Of 2017

Elon Musk is on a mission. Well, that’s not news. Elon is always on a mission of one sort or another. This time, the staggering number of reservations Tesla has received for its Model 3 has convinced Musk to move the production date for the car forward by 6 months. And he intends to teach the world how to do a better job of producing automobiles. Even though hundreds of millions of vehicles have been produced since the age of the automobile began, Elon thinks his company, Tesla Motors, can do it better, faster, and cheaper than anyone has ever done before.

Tesla Model 3

Musk likes to set lofty goals. He told the world a year ago that Tesla would be making 500,000 cars a year by 2020. That was before the Model 3 was revealed on March 31. Musk expected to get maybe 50,000 reservations for the car. But almost 400,000 people have ponied up $1,000 to reserve one and that has prompted Musk and Tesla to rethink things a bit. In the letter the company sent to investors last Wednesday, it boldly announced the 500,000 car target had been moved forward two full years to 2018.

During the conference call that followed, Musk elaborated on just how he and Tesla plan to make that happen. First of all, he says the final production specifications will be locked in by June 30 of this year. After that, the various outside suppliers will be expected to get all their ducks in a row by that date. Just to be on the safe side, Tesla says it will be able to manufacture almost every part of the car in-house if necessary. That way if a supplier is unable to deliver on time, Tesla will simply make the part themselves. Nothing will be allowed to stymie full production as happened with the Model X.

Production of the Model X was hobbled for nearly 8 months by a shortage of critical parts. As Musk told his audience Wednesday, if even 1% of the parts needed to build a car are unavailable, production stops. He is determined that won’t happen with the Model 3. And when Musk makes up his mind about something, his decision becomes a force of nature. Like a tidal wave, it sweeps aside everything that stands in the way.

Musk said Model 3 production is now scheduled to begin July 1, 2017. He is smart enough to know that just because production is scheduled to begin on that date, that doesn’t mean the factory is going to suddenly go straight into working at maximum speed. There will be issues to be resolved and unexpected quality glitches to deal with. But the Model 3 is designed for ease of manufacture. “[W]e’re not adding extraneous features to the 3 that aren’t necessary to achieve the production volume,” Musk said.

“Will we actually be able to achieve volume production on July 1 next year? Of course, not. The reason is that even if 99% of the internally produced items and supplier items are available on July 1, we still cannot produce the car because you cannot produce a car that is missing 1% of its components. So the reality is that the volume production will then be some number of months later as we solve the supply chain and internal production issues. So as a rough guess, I would say we would aim to produce 100,000 to 200,000 Model 3s in the second half of next year. That’s my expectation right now. Yeah, so that’s the thing.”

Is that a lofty goal for a car that won’t even have its final design specs determined until June 30 of this year? Absolutely. And it will require Tesla to raise more capital and spend a lot more money that it planned on right away. But the market has spoken. People want the Model 3 and they want it now. If Elon Musk knows anything it is that you have to give the customers what the want. The finances will take care of themselves — eventually.

Investors aren’t so sure. A lot of people think Musk is attempting to reach too far too fast. On Thursday, the value of Tesla shares dropped 5% as doubters sold off shares in a company they see sailing straight onto the rocks of reality. The truth is that Tesla has never delivered a new product on time yet. What assurance is there they will do so this time? The only hope is the indomitable, unwavering, unstoppable vision of Elon Musk. In the end, that may be all the assurance anyone needs.

Transcript of Musk’s conference call remarks provided by Seeking Alpha.  Photo credit: Tesla Motors

Steve Hanley

Closely following the transition from internal combustion to electricity. Whether it's cars, trucks, ships, or airplanes, sustainability is the key. Please follow me on Google + and Twitter.