Progress report on the Tesla Model 3
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The long-awaited Tesla Model 3 small car is one step closer to reaching production.
Tesla Inc., the California electric-car manufacturer, confirmed to multiple news outlets that it had halted assembly at its Fremont, Calif., plant for one week in March so it could begin preparing for the Model 3, perhaps as soon as July. Test versions of the Model 3 are reportedly under construction now.
The Model 3 is slated to be the automaker’s least-expensive car, with a starting price of around US $35,000, compared with a base price of US $68,000 for the Model S and US $85,500 for the Model X utility vehicle.
CEO Elon Musk has said that Tesla has taken more than 370,000 deposits of $1,000 each for the Model 3, and the company hopes to ramp up production to about half a million cars a year.
According to Fortune.com, Tesla produced a scant 24,882 vehicles in the fourth quarter of 2016, with the automaker looking to increase production by four to five times its current volume by the end of 2018. Total production for the 2016 calendar year was about 84,000 vehicles.
That makes the Model 3 a huge part of Tesla’s strategy.
“If successful, the sedan could raise Tesla beyond a niche luxury player in the automotive sector,” reported Fortune.com.
A Tesla spokesman told Reuters. com that the “brief, planned” Fremont plant shutdown would allow the company to ramp up capacity in its paint shop.
“This will allow Tesla to begin Model 3 production later this year as planned and enable us to start the ramp towards 500,000 vehicles annually in 2018,” the spokesman told Reuters.
The Model 3 is a huge venture for Tesla and its CEO.
“Musk’s bold approach to cars, space exploration and clean energy has fueled investor enthusiasm for Tesla, but skeptics are waiting to see if Musk can fulfill his promise of producing 500,000 cars per year by
2018,” Reuters reported.
And there is a big question mark. Tesla has a lengthy history of missing launch-target dates and production goals. On top of that, Tesla has not been profitable in a single year since the company went public in 2010.
Still, despite the occasional hiccups and the hyperbole surrounding its cars, Tesla has a lot of solid support.
Even without profitability, its stock has soared and the automaker has been at the top of the Forbes Most Innovative Companies list the last two years.
In fact, Forbes.com said a successful launch of the Model 3 ought to allow Tesla to become profitable.
“We believe Tesla will roughly break even at around 275,000 units and start generating company
profits above that volume,” Forbes wrote.
“The bottom line is that sustaining Tesla’s lofty stock price depends on Model 3 volume. Musk was right when arguing that Model S and X were key to launching Model 3 — the car that can drive the firm to profitability,” Forbes said.
“If Model 3 generates 400,000 orders per year (the number of current reservations), the lofty stock price makes sense. If not, that’s obviously a very different ending to the story.”
At this point, the story has yet to be completed. But it remains one of the most compelling and closely watched stories in the auto industry: Can a bold upstart with a radically different vision successfully compete as a high-volume manufacturer against the Detroit Big Three and the best from Europe and Asia?