Tesla is increasing the production of Model 3 cars due to increasing demand

Tesla is finding it is a very difficult way out of production hell. A day after starting one of its cars into space, Tesla proceeded on Wednesday to mitigate concerns on Earth over production shelves for its Model 3, the key to future growth for the star electric carmaker.

1/4th year earnings update, the carmaker headed by entrepreneur Elon Musk stated it is going ahead toward its aim of producing 5,000 Model 3 vehicles per week by the end of the second quarter.

Musk said to shareholders in a latter that it has been a trouble to get precise forecasts for the car, a more inexpensive model for the automaker known for expensive vehicles.

“What we can say with confidence is that we are taking many actions to systematically address bottlenecks… and these actions should result in our production rate significantly increasing during the rest of Q1 and through Q2.” – elon musk informed shareholders.

The electric car maker is thankful to some investors and customers when it said it is plunge to its latest Model 3 production objective. Still there are queries from some analysts over accurately where Tesla is in its production ramp and concerns that its goals may be too dynamic.

“The data point everyone wants, we didn’t get — current Model 3 run rate,” said RBC analyst Joseph Spak in a letter sent after the company surveyed earnings that beat analyst hopes on Wednesday.

Tesla disclosed a record loss for the quarter of $675 million (approximately Rs. 4,300 crores) on revenues of $3.3 billion (roughly Rs. 21,200 crores). Tesla share price increased to 1.7 percent in after-hours trade, on the upbeat prediction of production trials. In the quarter, Tesla delivered 29,967 vehicles along with 1,542 Model 3 vehicles. Model 3 price range is starting from $35,000 (nearly Rs. 22.51 lakhs), is an uplift to Tesla’s effort to turning out to a mass producer and reshaping the automotive market. Other cars will be around twice that price.

Tesla had previously targeted to be making 5,000 Model 3 cars per week by the end of 2017, but since then the company altered that deadline two times. On Wednesday, the company recapitulated its goal of achieving the target by the end of the second quarter, and reaching a smaller goal of 2,500 cars per week by the end of the first quarter.

“We view the 2,500 target in March, in particular, as extremely aggressive due to management’s acknowledgment of needing to get the robotic equipment in Germany disassembled, shipped to the US, and then reassembled and programmed in order to hit roughly 2,000 to 2,500 units per week,” said Cowen analyst Jeffrey Osborne in a note sent Thursday.

There may be an upside to the doubtfulness though, said Baird analyst Ben Kallo in a note sent Thursday.

“There continues to be significant skepticism about TSLA’s ability to ramp manufacturing, although management clearly outlined its challenges in ramping battery pack production, and the steps it is taking to resolve production issues, including new equipment installations expected in March,” Kallo said. “We believe the delayed ramp has derisked the stock, and incremental production data points should drive shares higher as TSLA works towards its 5k/week target.”


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