There was ample fodder for both bulls and bears in the Q1 car production results released by Tesla yesterday.
Bulls can point to record vehicle production in the quarter. Tesla manufactured 34,494 vehicles in Q1 2018, up 40 percent from Q4 2017. The company made 9,766 units of the mass-market Model 3 sedan, a fourfold increase over the previous quarter.
By the end of March, a doubling of the weekly production rate for the Model 3 pushed its output above the combined weekly production rates for the Model S luxury sedan and the Model X SUV.
Deliveries for the quarter came in just under 30,000 units, with Tesla shipping to customers 11,730 units of the Model S, 10,070 units of the Model X, and 8,180 units of the Model 3. Tesla expects to meet its 2018 delivery guidances for the Model S and Model X.
Reservations for the Model 3 “remained stable,” with cancellations attributed “almost entirely due to delays in production in general and delays in availability of certain planned options.”
Tesla remains optimistic it can meet its ambitious Q3 production target for the Model 3. In a statement, the company said it aims to be making “approximately” 5,000 units per week of the Model 3 “in about three months.”
If Tesla can hit that ramp-up target, the company sees “the long-sought ideal combination of high volume, good gross margin and strong positive operating cash flow.” Pushing back on skeptics who insist the company will need to raise more cash to ramp up production, Tesla said it “does not require an equity or debt raise this year, apart from standard credit lines.”
Tesla also sought to dispel quality concerns for the Model 3, which GTM reported on last month. “The initial customer satisfaction score for Model 3 quality,” the company said, “is above 93%, which is the highest score in Tesla’s history.”
Model 3 production surges, but still misses the mark
The Tesla bears, meanwhile, can point to yet another production milestone missed for the Model 3. Tesla made 2,020 units of the Model 3 during the last seven days of Q1, well short of its 2,500 weekly target.
Tesla came up short despite an end-of-quarter production surge that saw engineering chief Doug Field exhort employees to “prove a bunch of haters wrong” by shifting internal resources toward the Model 3 line in order to push Model 3 production beyond 300 cars per day.
Tesla ended up producing 289 Model 3s per day in the last week of March. The company says it expects to make 2,000 Model 3s over the next week.
Tesla bulls vs. the bears
Who has it right? Tesla bulls or bears? For now, investors appear to have been reassured by the Q1 results. At the end of yesterday’s market close, Tesla’s stock stood at $267.53, up nearly 6 percent over the previous day’s close.
After assessing Tesla’s Q1 production numbers as well as the company’s cash burn, Bloomberg’s Liam Denning wondered if the shareholders’ optimism was justified.
“Taken as a whole,” he wrote, “Tesla’s forecast burn rate and debt maturities across 2018 and 2019 add up to around $5.5 billion. That is equal to the amount of cash and available unused credit Tesla had at the start of this year. The implied margin of error is exceedingly tight.”
“Despite Tuesday’s defiant statement,” he concluded, “a capital raise to cushion against further snafus would be the prudent thing to do. Without fresh funds, it’s tough to see how Tesla achieves the spectacular growth still priced into its shares.”