Tesla will make about 5,000 units per week in about three months. This pace of production should end any talks of the need to raise more capital to keep things going. The company announced on Tuesday that it built 2,020 Model 3 sedans in the last week of March. Tesla plans to keep ramping up production over the next few months to get to strong positive operating cash flow by quarter three of this year.
Slow Production Could Hurt Brand Perception
Tesla is still behind its own target of 2,500 units per week by the end of March, but the 2,020 unit mark is a significant increase over previous benchmarks. The company has said it will ramp up production, and it appears it’s doing so, despite the fact that it’s a little behind schedule.
The 500,000 advanced reservations for the Model 3 are overdue for being filled, but with the company producing 5,000 per week, it would start making a dent in that number pretty quickly. Tesla has to get moving if it’s going to keep its rabid customer base happy. Customers could pull their reservations if they don’t get their cars in a reasonable amount of time.
With that said, it seems that Tesla outperformed some estimates. Autoblog reported that Evercore ISI analysts said the 2,000 units mark at the end of March may have been below Tesla’s targets, but it beat expectations set by Wall Street. This had an impact on stock prices, and that kind of positive progress can help keep brand perception high.
Can Tesla Keep Quality High?
Even if Tesla can ramp up production and start getting cars to customers, there’s the question of whether or not the cars will be high-quality. The first Model 3 sedans to reach customers showed signs of poor construction and some were offered with poor quality or incorrect equipment. As production begins to ramp up, it seems that these quality issues would just be more difficult to manage.
Tesla, however, thinks it can keep quality high while producing more cars. The company is new to this level of production, and it makes sense that there would be some growing pains. That said, it will be interesting to see how much abuse from a quality standpoint its customers are willing to take before they jump ship. Waiting a long time for an innovative, high-quality car is one thing, but waiting a long time for a car of poor quality is another.
With more automakers producing EVs with comparable range specs and performance numbers, Tesla’s offerings could start to look less enticing to buyers in search of an innovative EV. Chevrolet’s Bolt is a good alternative to Tesla’s Model 3 sedan, and that car is available now and built by a company with far fewer growing pains to go through. Only time will tell if Tesla can pull off building Model 3 sedans at a fast rate while keeping quality high. It will be interesting to see how things shake out.