Tesla (TSLA) achieved its production goal of 5,000 units a week for its Model 3 cars by the end of June. The next step is achieving 6,000 units per week by August. Although the company had earlier planned to reach 10,000 units per week by the end of this year, its long-term goals have now changed.
Tesla’s current projections are to achieve 7,000 units per week by the end of 2018 and then to increase this level to 10,000 units a week by the middle of next year. Despite Tesla’s high hopes of doubling its Model 3 production rate in a relatively short span of time, analysts are doubtful of the company being able to maintain its current production rate.
The Model 3 production still faces issues which Tesla CEO Elon Musk hopes will be resolved in a month. Whether Tesla will be able to maintain its production rate of 5,000 units per week without having any temporary peak production periods, and while retaining good quality and profitability remains to be seen.
Tesla is also looking to build a factory in China, named Gigafactory 3, with plans to produce 500,000 electric vehicles per year. Production at the factory is anticipated to start around two years after construction, which is expected to begin once all the required approvals are received. The company expects to scale to an annual production rate of 500,000 vehicles within 2-3 years.
Although the plans might seem far-fetched to some, there are experts who believe they are doable, especially since in Tesla’s case, production would very much commence even before the factory was entirely completed.
However, what analysts are concerned about is the funding. The Gigafactory 3 could very well cost above $5 billion and although Tesla could look at financing options like debt, equity or partnerships, how much the company manages to secure and how it deals with these rising expenses are issues that raise eyebrows.
On the bright side, Tesla can expect some support from the Chinese government in terms of incentives or subsidies as the nation would be more than willing to help the company make significant investments that would help boost their electric car market and in turn their economy.
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