1000th Tesla Model S

Tesla produces 1000th Model S body as manufacturing rate increases

The success of Tesla Motors hinges in a big way on how quickly and how big the company can scale up its manufacturing rate, and a tweet proclaiming the 1000th Model S body should bring a sigh of relief to the lips of Model S reservation holders.

By the end of 2012, Tesla Motors expects to build and deliver 5,000 units of the Model S electric luxury car, according to projections spoken by Elon Musk at last June's shareholders meeting. At that same meeting he said the company's success hinges on delivering at least 10,000 or Model S's in relatively short order, so that the company can begin to have a stable financial footing. Signs are that Tesla may not make this goal, but that they won't be too far short, depending on how quickly manufacturing ramps up. In a tweet on Sunday, Elon Musk claimed the company had built its 1000th Model S body.

In June, Musk predicted Model S sales would be: In 2012 and 2013 the company will be selling only the Model S, and expects to sell 5,000 units in 2012, and 20,000 units in 2013. He also said, answering a shareholder query, that even if the company sells only 8,000 Model S's that Tesla would be at the break-even point (cash flow positive), and that Tesla had (at that time) over 10,000 orders in for the Model S. The last five months the company surely received more than a few more Model S orders.

In an October 3 blog post, Elon Musk claimed Tesla had produced its 500th Model S body, meaning that in approximately 1 month the company has produced 500 Model S bodies. And, of course, producing a car body is merely the first step in producing a full car. It has to be painted and all sorts of components installed, and then the car must be tested. In that same blog post he discussed supply chain difficulties because of a "global supply chain" that is susceptible to "floods, fires, hurricanes or earthquakes" which can cause "supply chain interruptions and halt production". The parts supply problem had meant that the company missed a 500 vehicle production target for 2012 Q3 and instead the company completed 359 vehicles in Q3. Reading between the lines, the car body manufacturing may be running ahead of supplies of critical components to produce finished Model S's.

How then do we interpret his tweet:-

At the surface it's worthy of congratulations. Tesla Motors, a start-up automobile manufacturer in an industry that rarely sees successful startup companies, has managed it. They have managed to design a manufacturable car from scratch, and go to manufacturing with it.

But what does this mean for the 5,000 car production target for 2012?

As far as producing Model S bodies goes, they've increased the production rate. The first 500 took part of Q2 and all of Q3 to produce, while the second 500 took October to produce. This implies the company should be able to ramp up production even further. But to meet the 5,000 goal they still have to manufacture 4,000 more Model S's and one finds it unlikely they'll be able to do this. Especially because the data present is solely the car body manufacturing rate, not the rate for producing finished cars.

In a filing with the SEC, Tesla said it expects to sell only 2,700 to 3,225 cars by the end of the year instead of the 5,000 target. Would that be a disaster? Would that mean the end of Tesla because the company is obviously such a loser? Given the tone of Republican right-wing rhetoric (Romney tries to Solyndraize Tesla Motors, calling it a 'loser') there's likely to be a round of Tesla-bashing in early January when Tesla discloses it did not meet the 5,000 unit sales target.

What that future bashing will miss is the fact that in 6-7 months Tesla will have outsold its entire production of the Tesla Roadster, and that a from-scratch startup automobile manufacturer is in the middle of growing pains.

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