Tesla is prepping for production of its long-anticipated Model 3 later this summer, but the latest financial news renewed doubts about the company's transition from a boutique automaker to a larger one.
Tesla's net loss amounted to $330 million during the first quarter of 2017 as the company burned through cash in a rush to set up production of the Model 3. At the same time, the electric automaker reported record deliveries of the Model S and the Model X — its only vehicles in production — generating $2.7 billion. The better-than-expected revenue buoyed its stock value past two Detroit giants immediately following the release of its financial results.
"Model 3 vehicle development is nearly complete as we approach the start of production," Tesla said in a statement. "Release Candidate vehicles, built using production-intent tooling and processes, are being tested to assess fit and finish, to support vehicle software development and to ensure a smooth and predictable homologation process. Road testing is also underway to refine driving dynamics and ensure vehicle durability."
After production starts in July 2017, Tesla hopes to ramp up production to 5,000 cars per week later this year, and reach a 10,000-unit-per-week production output sometime in 2018. Even so, it will take Tesla a significant amount of time to work through the backlog of orders that it received when it started accepting deposits for the electric sedan in 2016. New customers will likely have to wait in line for months, while used Model 3s may become a hot commodity among private speculators.
But industry analysts continue to view the launch of the Model 3 as a make-or-break moment for the automaker since investors are tying the company's financial future to its first truly "volume" model.
There are plenty of reasons for skepticism: The last new model introduced by the automaker — the Model X — arrived on the scene with a polarizing look, design oversights that required "hardware patches" and manufacturing issues that continue to pop up on delivered cars. The automaker's rollout of its Enhanced Autopilot driver assist system has already attracted a class-action lawsuit amid a continued string of crashes worldwide in which (proper and improper) Autopilot use was suspected or confirmed.
There's also the issue of store and service infrastructure. The automaker has struggled to open stores in individual U.S. states, having to fight dealer franchise laws on almost every occasion, and is viewed as not having spent enough time creating service facilities to support the growing fleets of Teslas. Tesla is also building its network of stores overseas, creating concerns about devoting its attention to too many things at once.
"As part of our Model 3 launch preparations, we are significantly expanding our infrastructure to support Tesla owners by increasing the density and geographic footprint of our presence," the automaker said in a statement. "This year, we plan to add nearly 100 retail, delivery and service locations globally, representing an approximately 30 percent increase in facilities. These additions include the Q1 openings of our first stores in Dubai and South Korea. To significantly improve the customer experience with out-of-warranty body repairs, we intend to open the first Tesla-owned body repair shops later this year and expand the existing network of third-party Tesla certified body shops."
A big chunk of the company's health continues to ride on the successful customer launch of the Model 3, which is expected to start at $35,000 before any federal or state tax breaks, and offer a pure-electric range of 215 miles. The Model 3's max range was already upstaged by the 238-mile Chevrolet Bolt, which itself received a muted debut amid a growing industry-wide inventory glut and a consumer shift to larger and thirstier vehicles.
Recent debuts of pure-electric cars have been plagued by an age-old auto industry problem: Designed and engineered in one economic/consumer climate, they arrive for sale in a markedly different one. The Tesla Model 3 may buck this trend, even if its 215-mile range is seen as good but not industry-leading, but it doesn't change the fact it will start shipping amid an expected period of market satiety. Still, the hundreds of thousands of back orders should help Tesla generate positive Model 3 headlines, at least in the short term.
Tesla Model 3
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