Tesla Model 3 Production Stalled?

Summary

• Bloomberg cuts its estimator forecast by about 200 units/week.
• InsideEvs estimates little progress for the Model 3 in February.
• Meanwhile, Model S/X sales estimates continue to struggle.

With two months in the books for 2018, we may be approaching the most important month of this year for Tesla (NASDAQ:TSLA). With multiple delays in the company's production forecast for the Model 3, this may be the last chance for management to prove itself to investors and consumers. Unfortunately, many third party Tesla tracking sites continue to show a situation that is less than ideal for both the Model 3 and the S/X.

During February, Bloomberg started a Model 3 tracker to estimate the current Model 3 production rate. Their estimate is based on a couple of items, such as VINs that Tesla has registered along with VINs seen in the wild or reported directly to Bloomberg. The highest production rate I've seen for this estimate was just over 1,050 units per week. Unfortunately, as you can see in the graphic below, there have been a number of cuts in recent days, with the current estimate being just 857 units per week.

(Source: Bloomberg Model 3 tracker)

If this estimate is anywhere close to being correct, it would seem almost impossible that Tesla gets to its current forecast of 2,500 units per week by the end of Q1. In fact, since the company stated that it produced almost 800 units in the last 7 working days of 2017, and some of its lines were extrapolating to over 1,000 units per week, this would be almost no progress in two months.

For those not believing the Bloomberg tracker, InsideEvs is one of the sites that most bulls and bears agree does a good job of estimating Tesla's US figures. The site's February scorecard is out, and it shows just 2,485 Model 3 deliveries for the month, an increase of just over 600 units. This would seem to confirm the Bloomberg data that Model 3 production is well behind schedule and unlikely to hit current targets.

Unfortunately, the situation with Tesla's luxury models, the S and X, doesn't appear to be much better. The bull camp wants you to believe demand is soaring, but registration and sales estimates don't show that reality. Management is limiting production to 100,000 units this year, which it says is a result of limited battery cells, but if the demand was really there, Tesla would be producing more.

Remember, management had guided to over 2,400 units of production per week in Q4 2016, and it has never gotten there. With February estimates starting to come in, the table below shows how things are not looking good as compared to the record sales period of Q4 2017.

(Source: Teslastats.no, InsideEvs monthly scorecard, TMC Europe tracker)

Unfortunately, the situation gets even tougher in March for Norway, one of Tesla's most important markets. According to Teslastats, that country had almost 2,500 registrations in December, a mark the company will have a very tough time hitting this month. The first day of the month has just 3 registrations so far, compared to 95 from the first day of December. Throw in another big down month from the US, and Tesla will have a very hard time meeting last year's Q1 sales of 25,000 plus. Things are trending towards the first year-over-year decline for the S and X.

Worse yet, Tesla continues to reportedly plunge into older model year vehicles for its sales. Of the 305 registrations documented by Teslastats so far in Q1, 19 of them were previous model years, mostly 2016 or earlier. That compares to 14 in all of 2017, and 6 of those were in December. So after selling just 8 prior year or earlier vehicles in the first 11 months of 2017, Tesla has sold 25 of these in the three plus months since. That cannot be good for margins.

In the end, another weak quarter for the Model 3 could be the breaking point for consumers and Tesla investors. The Chevy (GM) Bolt just showed a 50% rise in February sales over last year, the new Nissan (OTCPK:NSANY) Leaf set a record in Norway, while Jaguar's (TTM) I-Pace will launch this afternoon and more competition is coming.

With sales of Tesla's higher end models also struggling, huge losses and cash burn could only make the debt situation worse. That's especially true as interest rates continue to soar, like LIBOR rates where the 3-month just topped 2.00% and the 12-month is now above 2.50%. After recently peaking just under $360, Tesla shares have come down more than $20 as seen below. Perhaps investors are worrying about the Model 3.

(Source: Yahoo! Finance)

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Investors are always reminded that before making any investment, you should do your own proper due diligence on any name directly or indirectly mentioned in this article. Investors should also consider seeking advice from a broker or financial adviser before making any investment decisions. Any material in this article should be considered general information, and not relied on as a formal investment recommendation.

Comments

[Dansplans]

InsideEVS is US sales numbers, which are great for an overall look, and horrible for any proper statistical analysis.

Based on the quarterly figures for production, with 12 weeks of actual quarterly production, Tesla has been producing between 1973 and 2142 units per week in 2017. I am assuming that you provided verifiable Tesla numbers above.

I don't know how you can have provided any numbers for 2018, as we don't have a verifiable quarter in the books yet. Frankly I am doubtful of an almost 50% decline in 2018 production numbers, even if production is sharply reduced.

[User 48490159]

kitsinu:

When did Tesla start publishing monthly production numbers?

[kitsinu]

"In addition, because our vehicle models share certain production facilities with other models, the volume or efficiency of production with respect to one model may impact the production of other models."
Tesla 2017 10-K SEC Filing
http://bit.ly/2G3Zzzh

Model 3
Jan, 2017:
Feb, 2017:
Mar, 2017:
Apr, 2017:
May, 2017:
Jun, 2017:
Jul, 2017: 30
Aug, 2017: 75
Sep, 2017: 117
Oct, 2017: 145
Nov, 2017: 345
Dec, 2017: 1,060

Jan, 2018: 1,875
Feb, 2018: 2,485

Model S
Jan, 2017: 900
Feb, 2017: 1,750
Mar, 2017: 3,450
Apr, 2017: 1,125
May, 2017: 1,620
Jun, 2017: 2,350
Jul, 2017: 1,425
Aug, 2017: 2,150
Sep, 2017: 4,860
Oct, 2017: 1,120
Nov, 2017: 1,335
Dec, 2017: 4,975

Jan, 2018: 800
Feb, 2018: 1,125

Model X
Jan, 2017: 750
Feb, 2017: 800
Mar, 2017: 2,750
Apr, 2017: 715
May, 2017: 1,730
Jun, 2017: 2,200
Jul, 2017: 1,650
Aug, 2017: 1,575
Sep, 2017: 3,120
Oct, 2017: 850
Nov, 2017: 1,875
Dec, 2017: 3,300

Jan, 2018: 700
Feb, 2018: 875

http://bit.ly/2zs41nM
All Model Vehicles
Jan, 2017: 3,467
Feb, 2017: 3,467
Mar, 2017: 3,467
Apr, 2017: 3,247
May, 2017: 3,247
Jun, 2017: 3,247
Jul, 2017: 5,001
Aug, 2017: 5,001
Sep, 2017: 5,001
Oct, 2017: 5,002
Nov, 2017: 5,002
Dec, 2017: 5,002

Jan, 2018: 3,375
Feb, 2018: 4,485

It looks like there is a 1:1 correlation between the different Models in which the factory can only produce 1 vehicle, not 1 Model 3 and 1 Model S or Model X. Since Model 3 production began, Tesla's total vehicles per month has dropped. Current maximum capacity is around 5,000 per month, or about 1,250 per week.

I suspect that the factory isn't operating while they upgrade the production lines and build up battery packs for the last week of the quarter push for 2,500 Model 3s. I suspect Model S and Model X numbers are far more important than the Model 3 numbers. The Model S and Model X numbers for that last week would tell us whether production correlates 1:1.

[kitsinu]

Be advised that the numbers I used in this post use the InsideEVS numbers, not the production numbers posted by Tesla. Tesla's numbers show a monthly vehicle production rate of:
Q1 2017: 8,473 Vehicles per month
Q2 2017: 8,569 Vehicles per month
Q3 2017: 8,433 Vehicles per month
Q4 2017: 7,893 Vehicles per month
Q1 Jan 2018: 3,375 Vehicles per month
Q2 Feb 2018: 4,485 Vehicles per month

[Jazzenjohn]

Over an over I se this BHAG and the 2020 target. Has everyone forgotten that this new 2018 goal was tied to raising something like 3,500,000,000.00 dollars ???
Not A BHAG when it was bought with that kind of money. If it was, they should have told investors that all that money was just for a possibility of moving up the production, no guarantee. How many people would have invested had he said that?

[TePeL]

Disclosure: I have no shares in Tesla or Big-Oil or Magna.
Tesla's Supply & Demand constraints: The way this all seems to me is even though OPEC didn't get their way in terms of profits, they have most certainly hindered the race to EVs through cheaper Gas & Diesel prices. A lot of this has to do with new drilling/fracking technologies that are keeping the supply/demand in check, but the other side is how Americans who now see lower prices at the pumps are rushing out to go buy SUVs, Trucks and giant/muscle vehicles with thirsty V8's. You know, it's been nearly 5 years since I've seen a Hummer H2 on the roads. Now they are everywhere since gas in below $5/gallon. Where were these things? <-- Garage decoration likely... I can go on and on about all this, but the new Hybrid standard appears to be 50MPG thanks to Honda Accord innovations. This is the new pace, and the Toyota Prius is quickly becoming a fond memory among new car buyers... Tesla has huge hurdles to overcome and they should have been only responsible for battery and power-train development instead of the entire car - they just lack fit and finish and integration standards that have improved greatly for the big-dog manufacturers. They should have initially outsourced their frames to an independent like Magna Powertrain - which has plants both in Austria and Canada. I'm certain if the right deal was on the table, they would have created an assembly line integrated into the Tesla MegaFactory and it would have been way more likely Tesla could have met these high delivery numbers. This is the end of my opinion. Thanks!

[milachka]

Bloomberg now says Weekly Model 3 Production Rate = 701

[User 828881]

? mine says updated March 4th, 667

[User 48490159]

TheBoringAnalyst

>>mine says updated March 4th, 667

That's right.

[LucasErratus]

667. Just checked. Either way, it’s a gimmick attempt they made to sell ads. It was half assed. They assumed the 1,000/week achieved last week of December, but unfortunately for the longs, they saw it as validation of Tesla’s latest claims and trusted it. As I said in prior posts and elsewhere, that number was a lie. Tesla hoarded M3 cars in Fremont, then released them last week of December to pretend they ramped up production. It was highly deceitful and will probably get people prosecuted some day once the poo hits the fan.

Reality of vehicle delivery numbers coming in is causing the huge swing on Bloomberg’s tracker now. The truth is coming out.

Check out this link that spells it out in much more detail.
http://bit.ly/2FRlbPd

[Sneakerbuddy]

Following up with more detail on a great tweet by @TeslaCharts. The SEC has just got to be looking into this situation.

How many of these statements were materially misleading - and known to be false - when the company made them? Did the company have the production equipment in place or scheduled? Did they have the required inventory ordered and in place? Did they have internal memos from line managers supporting the claims by management?

Date, Event, Statement:

8/2/17 Q2 Earnings Release
“The standard Model 3, starting at $35,000 with 220 miles of range and a 0-60 mph time of 5.6 seconds, should be available in the U.S. in November.”
“ Based on our preparedness at this time, we are confident we can produce just over 1,500 vehicles in Q3, and achieve a run rate of 5,000 vehicles per week by the end of 2017.”

10/2/17
“Q3 Production…260 of them being Model 3”

11/1/17; Q3 Investor Update
“With respect to the timing for producing 10,000 units per week, it has always been our intention to implement that capacity addition after we have achieved a 5,000 per week run rate."

11/3/17; Q3 Earnings Call
“what we know now, as we've gotten really into the details of some of the worst bottlenecks, we expect to achieve approximately 5,000 Model 3 vehicles per week by late Q1 2018”
“but almost no CapEx to reach something close to 10,000 units per week”
“ something like a few thousand units per week at the end of Q4. But does it reflect like if you said, "Okay, what about a few weeks after Q4?" I'd say, "Yes, definitely." So it's just going to be very, very sharp. Rising very, very sharply at that time”

1/3/18; Q4 Vehicle Production and Deliveries
“Q4 production …. of which 2,425 were Model 3.”
“In the last seven working days of the quarter, we made 793 Model 3's, and in the last few days, we hit a production rate on each of our manufacturing lines that extrapolates to over 1,000 Model 3's per week.”
“likely ending the quarter (Q1 2018) at a weekly rate of about 2,500 Model 3 vehicles”

2/7/18; Q4 Earnings Call
“As for Model 3 production, we continue to make significant progress every day, and we're targeting a weekly production rate of 2,500 vehicles by the end of March”
“So, we expect to alleviate that constraint [battery production]. That – with alleviating that constraint, that's what gets us to the roughly 2,000 to 2,500 unit per week production rate.”
“So that [production line from Germany] would be the next constraint on production to get to 5,000 is the conveyance system in Fremont.”
“[$3.5 billion in 2018 Cap Ex] Way more than 50% is Model 3” “We will still have futher investments in 10,000 per week of Model 3 happening next year [2019]”
“And I think we can get 10,000 vehicles a week out of Fremont without a significant – without creating really any new buildings of significance in the existing space.”

2/8/18 Earnings call correction
“ Tesla’s ability to meet its target of 2,500 per week by end of Q1 2018 is not dependent on the additional equipment that is currently located in Germany, as that equipment is expected to start ramping production during Q2 2018. With respect to battery module production, Tesla’s ability to meet its target of 2,500 per week by end of Q1 2018 is dependent only on the equipment that is already present at Gigafactory 1, as well as the incremental capacity that is currently being added through the semi-automated lines that were also discussed during the conference call.

[User 828881]

Yeah it's a scam, they must have really thought they could sell more stock by now but for some reason couldn't pull it off.

[TheBallgame]

Or they’re hoarding constrained parts and/or ‘partially’-manufacturing vehicles now, so that they can miraculously claim 2,500 “vehicles manufactured” (i.e., where manufacturing is finalized) during the final week of March...

[kitsinu]

I think Fremont may be getting line improvements while the constrained battery packs are stockpiled for the big push at the end of March. The lines need improvement too, so it works out well for Tesla. I am thinking less than 2,500 for the last week of March at the cost of all Model S and Model X production.

[kitsinu]

Tesla is approaching the 200,000 cars delivered domestically that will result in the tax credit being cut six months after.

Might Tesla be intentionally cutting production in order to keep the full tax credit three months longer?

[Bill Maurer]

That would be a dangerous game to play given how much money they are losing and cash they are burning.

[LucasErratus]

@kitsinu Tesla is far enough away from that number, there’s absolutely no reason for them to delay in Q1.

“As of the end of last year, Tesla is estimated to have sold 155,000 to 170,000 vehicles in the U.S.”

http://bit.ly/2FQMlG2

[Andreas Hopf]

I have it at 165,049 incl. the Roadster.

[LucasErratus]

Well CleanTechnica sure likes to abuse moderation power. They denied the comment below on Model 3 delivery numbers supported with facts. Proof of post: http://j.mp/2CY5Qtk

Elon is playing shell games with Model 3 delivery numbers. They hoarded piles in Fremont in Dec, then delivered 1,000 the last week to claim they hit 1,000/week in Dec. Jan numbers didn’t work that way though at 1,875 for the month (~450/week) and now Feb numbers are in. “Model 3 sales gradually rising to an estimated 2,485” which is about 621/week. The last guidance from Feb 7 earnings call was 2,500/week by end of March. Jan to Feb is about 33% increase. They have four weeks to speed up about 400%. This is not looking good.

http://bit.ly/2FFv5Dv

[Rick Ballard]

Elon's blundering executive incompetence coupled with a BoD truly gifted with idiotic sycophancy will remain the primary constraint until a merciful bankruptcy ends Tesla's travails. The continuing SEC investigation appears to be protecting the stock market from further predation while Moody's promise of a junkier junk rating as Tesla continues to fail to reach the 300K run rate necessary to prevent its issuance protects the bond market.

That leaves the search for the stupidest White Knight in the world as the only remaining hope.

[TheBallgame]

Is the current production slow-down intentional, aimed towards being able to claim 2,500 in the final week of March? Could Tesla be seeing a constraint for a part or two? Might Tesla not be under constraint but rather building cars 95% of the way so they can finish them during the last week of March?

[In Cog Neato]

TheBallgame, "Is the current production slow-down intentional, aimed towards being able to claim 2,500 in the final week of March?"
Really? Idle workers? Slow down payments to vendors? Stock pile unused parts on scheduled deliveries? Is that any way to run a profitable business? Oh yeah, Tesla doesn't do the latter.

[oilyweasel]

“Alexa, cool the Jag to 68 degrees.”

[combatcorpsmanVN]

the 500,000 demand comment must be "the Party line'. The young salesman in Waikiki hammered on that point pumping the Model 3 delay.

[Muni Bond Guy -]

There surely is a playbook that the Teslarians carry around, and recite their verses.

Cash flow be damned!

[Muni Bond Guy -]

I gotta share this, so help me God it's true: I just left a little deli in southern Delaware. While I was waiting a 20-something year old guy walked in wearing a grey Tesla hat and a Tesla vest. I asked him if he worked for Tesla and he said yes (the solar company).

He swore the M-3 is the best car ever built and that there are over 500,000 firm orders, and that the production kinks have been worked out. I asked him if he owned one and he said "no." I pushed him a little on the production numbers (thanks Coverdrive, Montana, Hopf, and others) and asked him why no $35K vehicles are out, and he said soon. He also told me two of his friends have Model 3s, so naturally I asked them if they are Tesla employees too, and he said yes. He said they are the best cars ever made, and they'll be all over the road soon, when the Supercharger network is finished.

I just had a Close Encounter with an actual Teslarian!

(Sorry for this bit of self-indulgence.....)

[Muskburn]

Musk fanboys rather than Teslarian. Notice most if not all Tesla fanboys are also SpaceX fanboys, Hyperloop fanboys, boring fanboys etc. It's all about Musk worship. If Musk ever leaves Tesla, most of these fanboys will simply drop Tesla and follow Musk to where ever he's going to next. Fanboy investing is a very dangerous hobby, but don't tell that to Muskateers!

[insaneinthemembrane]

Why do all of these hucksters tend to be millennials? Is it because growing up in a "trending" and pampered environment has led them no further in critical thinking than "disruption", "visionary" and "awesome"?

[JCCIII]

Muni Bond Guy. Interesting Tesla post; thanks. Off topic, but based on your SA name and bio. I am fairly new to muni bond investing, but own 3 muni bond closed-end funds for the tax free income (VCF [I live in CO], VKQ, and NEA); and yes, they are getting cheaper in our rising interest rate environment. I wonder if you ever invest via muni bond closed-end funds or funds of any variety, and would you make any recommendations on funds if you do? Thank you.

[combatcorpsmanVN]

5 days in Waikiki and I've seen two Tesla Model S's. I'm a Bear on the shares but that surprised me. This area is the high rent district and has a Tesla dealership.

[kitsinu]

And Teslas are fairly large vehicles. The parking spots on O'ahu tend to be small. I hate when I travel to O'ahu for work and the rental companies give me a free upgrade to a midsized car because they are out of the compact car that I asked for. It is a pain to park larger vehicles on O'ahu.

Further, most people on O'ahu either park on the street or in a parking garage. Where are they going to charge the vehicle?

It rains very often on O'ahu and has a lot of sand. How will that impact any EV?

How about the air conditioning? I doubt that is standard, so how much does it cost extra?

I don't know the answers to these questions, and with a new type of vehicle, I doubt the prospective buyers know either. Simpler and cheaper to buy an ICE.

Most Hawaiians on O'ahu work two jobs or long salaried hours to be able to stay on the island. They don't tend to have spare money and do their green spending on other things.

[TimNeuman]

So... label me as slow.

Is two a large number or a small number?

[User 47798689]

"It rains very often on O'ahu and has a lot of sand. How will that impact any EV?"

Good point here. Electric cars are not well suited to rain or sand. The rain tends to leak into the gas tank where it makes the motor sputter or leaves you stranded. It also causes the chassis to rust out. And sand, oh, that's bad, especially coupled with the trade winds.

Sand plugs up the air filter of an EV and the finer stuff gets sucked into the air intake and whatever is too fine for the air filter is ingested by the motor where it requires regular changes of the oil and filter (but not before the abrasive qualities have done their dirty work inside the motor). The coarse stuff remains in the air filter where it reduces performance until the filter is replaced. This is a never ending problem for a EV because the motors and batteries have to ingest so much air. That's probably the biggest issue with electric cars.

"How about the air conditioning? I doubt that is standard, so how much does it cost extra?"

Oh boy, another thought most people overlook. Air conditioning is very important in Hawaii. Who wants to go from a perfect 78 degrees F to the inside of a vehicle that's 100F +? With a gas car you simply start the engine and turn on the air conditioning. In an electric car you have to use your cell phone to turn on the A/C 5 minutes before you arrive to the car so it's nice and cool inside when you get in. That's a huge problem because while it might be nice and comfy inside when you arrive, as soon as you open the door all that 78 degree air rushes in and you have to start all over again. With a gas car the hotter inside air rushes out right before you get in so it's comfy from the get go.

Yes, it comes standard. And unlike a dirty fossil fuel powered compressor that can only run at whatever speed your engine is turning, the compressor in a Model 3 runs from a very efficient variable speed motor. So it's always turning at the appropriate speed for the job at hand. It can ramp up to cool the interior quickly before you arrive and then settle down to efficiently maintain comfort at the selected temperature.

Obviously, anyone who buys a BEV in/around Waikiki is asking for trouble.

[Robert Auers]

Bloomberg production estimated reduced to less the 700 per week! lol

[BMan65]

Yep. Down from 1050 a week or so ago to 857 on March 1, to 694 a day later. Maybe "stepped exponential" meant to imply that the exponent would be negative.

[milachka]

I don't think Tesla has a sustainable lead over other companies. I very much doubt that the manufacturing prowess Musk anticipates will ever be realised. So far Tesla has been a hype because they clearly offer the best EV out there, but as soon as the others start producing they will be just one of many. And let's face it Tesla could do with a good designer. The cars they have produced until know are pretty bland looking. Even the upcoming roadster looks bland to me.

[taxistan]

milachka, have you seen the Jag I-pace. If there was ever a Tesla killer that is it. I want one!!!!

[Elronomics]

The only thing keeping this absured thing alive is the PPT and the FED propping the indexes up on a broader scale to make things "look good"
Print money out of thin air to support markets.
If that goes away Tesla is toast directly

[Arthur Shatz]

Musk, while certainly a visionary, is also a bit of a huckster. The sales pitch will only go so far, and if the Model 3 can't make it out of production hell, the sales pitch won't help the negative cash flows.