Tesla on Monday touted winning second quarter production numbers for the Model 3 alongside strong growth of the more expensive Model S and Model X. For the last week of June, Tesla said it produced 5,031 Model 3 and 1,913 Model S and Model X vehicles.
That’s in line with the goal the company set for itself at the beginning of the year to produce 5,000 Model 3 cars a week by the end of June. Tesla’s stock is about three-quarters of the announcement.
For the second calendar quarter, Tesla said it produced a total of 28,578 Model 3 vehicles—almost triple the 9,766 it did in the first quarter and more than it did last year. Meanwhile, production of Model S and X vehicles was flat at 24,761, slightly higher than last quarter but below the 28,320 Tesla vehicles produced in the fourth quarter of 2017.
Tesla averaged nearly 2,200 Model 3 vehicles per week during the second quarter. The company said it produced 5,000 cars a week by the end of the quarter, and expects to reach 6,000 cars a week by the end of August. This suggests there is room for Tesla to more than double Model 3 output in the next quarter.
Perhaps most important to Wall Street, Tesla said it will enjoy good cash flow and good earnings in the third quarter of 2018. This will be its first quarterly profit in two years and one of only a few quarters. that the company has achieved. a profit in its entire history.
It will also be consistent with Tesla’s historical strategy. With each of Tesla’s previous two vehicles—the Model S and the Model X—Tesla lost money for several back-to-back areas as it ramped up its manufacturing efforts. Once the cars were produced in volume, Tesla briefly enjoyed the profits—until the company began production on the next model and the loss began again.
The Model 3 is destined to be a much superior product than the Model S or Model X. That means huge losses over the past two years, but it also means huge cash flow and profits in the coming months. .
In an internal email announcing the layoffs last month, Elon Musk refused that Tesla needs to become “sustainable game” in order to achieve its goal of accelerating the transition to clean energy technologies. If all goes well, the scale of the Model 3 production could make that possible, making regular profits that Musk can then plow into upcoming projects like the Semi, Model Y, and a new version of Tesla’s high-end Roadster motor sport — thus avoiding the large cash flow movements of the past few years.
But Musk could also follow the same strategy as the last few product cycles: once he has demonstrated that the Model 3 can make profits for two quarters, he can start spending even more in order to strengthen the foundation even more. . Growth. After all, Musk’s compensation is tied to achieving huge gains in Tesla’s profits and stock price over the next decade. Hitting these targets will require the company to grow rapidly for years to come.