Production is up, but can it be sustained?
Tesla Motors accelerated production of its pivotal Model 3 sedan during the summer just as CEO Elon Musk promised, vindicating the electric car maker’s leader amid a backdrop of baffling behavior that jeopardized his job.
The company announced Tuesday that it produced 80,142 vehicles in the third quarter, marking a 50 percent increase over the previous quarter. Tesla also made a major leap in the number of cars that were delivered to customers who had preordered them.
The progress is essential to Tesla’s survival, not only to preserve customer loyalty but to bring in the cash that the company will need to repay $1.3 billion in debt coming due within the next six months. Producing more cars also should help Tesla begin making money, something it has been unable to do since going public eight years ago.
“Today’s production announcement offers a bit of redemption to the Tesla faithful,” said Jeremy Acevedo, Edmunds manager of industry analysis.
It also reverses a trend in which Tesla regularly missed its production goals while amassing huge losses, fueling doubts about its ability to expand from its niche of making luxury sports cars powered by electricity to become a major automaker. When the company hit its target for the first time in the last week of June, some questioned whether the feat was sustainable.
The accomplishments aren’t likely to keep skeptics from wondering whether Tesla will be able to crank out enough of its cars to be profitable.
“Going forward, it doesn’t prove much,” said Erik Gordon, a professor at the University of Michigan’s Ross School of Business. “They’re still producing in a tent, they’re still producing the numbers by working crazy hours.”