New production line crazy fast, says Musk
Tesla CEO Elon Musk is confident the company can finally meet a production target with its crucial Model 3 and predicted that manufacturing will become a strength for the electric-car maker over time.
He said it was “quite likely” Tesla would build 5,000 of the cars a week by the end of June. Tesla shares jumped, as the company has said that reaching this target will spur profit and cash generation in the second half of 2018.
Musk reaffirmed those forecasts and still expects that raising more capital would not be needed.
“It’s very difficult to become a mass-manufacturing car company,” he said on Tuesday after shareholders rejected a measure that would have required an independent director to replace him as chairman. “No one has succeeded in doing this in a very long time in the US.”
Manufacturing has befuddled Tesla ever since Musk predicted 11 months ago that “production hell” would be ahead for the first car the company was trying to make in high volumes. Missed targets for the Model 3 contributed to the company burning through more than $1bn in three of the past four quarters.
An activist investor group cited failures to meet goals with the car as one of the reasons investors should have opposed re-electing three directors to the board during Tuesday’s annual meeting, but its bid failed.
Tesla’s share price climbed as much as 4.5% in early trading on Wednesday. The stock has traded down 6.5% in 2018.
One of the reasons for Musk’s assurance that Tesla is turning the corner on manufacturing is the addition of a third general assembly line that completes the process of putting together the Model 3. The company started building the third line about two weeks ago and the initial cars are moving through “crazy fast”, he said.
“The biggest constraint on output is general assembly,” Musk said. “We can probably get to 5,000 a week with the current two general assembly lines. But with the third one, I’m highly confident that we can exceed 5,000 units per week.”
Tesla is also now turning its attention towards expanding its manufacturing capacity by adding another plant, which will produce cars, battery packs and powertrains in Shanghai.
The company may announce more details about that factory as soon as July, Musk said, and will reveal plans for another to be built somewhere in Europe towards the end of 2018.
The comments by Musk followed shareholders’ votes to reappoint three directors who were up for election during the meeting: private equity investor Antonio Gracias, Twenty-First Century Fox CEO James Murdoch and food industry entrepreneur Kimbal Musk, Elon’s brother.