Tesla’s “production hell” may finally be ending.
The company reached its goal of manufacturing 5,000 Model 3 cars per week during the last week of June. After months of delays, malfunctioning assembly lines, and criticism from Wall Street, the milestone ostensibly puts the electric carmaker on the path to profit. Tesla has told investors it must produce at least 5,000 Model 3s per week for the model line to achieve profitability. Tesla repeated its assurance on July 2 that it would generate positive cash-flow and profit in the last two quarters of 2018. (It’s only reported two profitable quarters since going public in 2010.)
“The last 12 months were some of the most difficult in Tesla’s history, and we are incredibly proud of the whole Tesla team for achieving the 5,000 unit Model 3 production rate,” the company wrote in a statement. CEO Elon Musk praised employees in an email over the weekend for the efforts the company made to hit its production goal, such as airlifting an entire vehicle assembly line from Germany and building a tent to house its new production facility. “Intense in tents. Transporting entire production lines across the world in massive cargo planes. Whatever. It worked,” Musk wrote. ”I think we just became a real car company.”
An all-hands effort meant staff were working shifts around the clock at its Fremont, California, factory, while a new assembly line was constructed under a massive tent that accounted for 20% of the quarter’s Model 3 production. Tesla reported making more cars than anytime in its history this quarter, with a total of 53,339 vehicles produced. It tripled its Model 3 production to 28,578 vehicles over the 9,766 it produced in the first quarter of the year. That exceeds the total Model S and X cars it produced this quarter (24,761 vehicles). Tesla says it predicts Model 3 production will reach 6,000 vehicles per week by late August. The Model 3 is the electric car-maker’s first mass-produced car, slated to sell for a base price of $35,000.
It was good news for wary investors, but doubts remain. Tesla’s stock initially jumped to $360 in morning trading, before falling 7% below the day’s peak to $336. Historically, Musk has returned to Wall Street to invest in new production and expansion, such as the 2016 acquisition of SolarCity, rather than cut costs. Tesla has denied it will need to raise more money before the end of the year, although Wall Street investment banks have disagreed. Tesla has made an all-out push before to deliver on quarterly milestones before running into trouble down the road in the past. It’s likely Tesla will need to show sustained production and profit before its stock takes off again.