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Tesla accelerates to hit target of 500 000 cars yearly

2016-05-05 10:00

MODEL NO.3: Tesla has a third model in the works and it's speculated to be more affordable than its current two models on sale. Image: Tesla Motors via AP

San Francisco - Tesla is speeding the timeline for building 500 000 cars annually as it steps up production to meet growing demand for its electric vehicles.

Hot demand for a new, more affordable Model 3 led the company to shave two years off its timeline for building a combined total of 500 000 vehicles, combining Model S, Model X, and Model 3, each year and make the new target date 2018.

In April, Wheels24 reported that Musk confirmed the Model 3 is headed for South Africa.

Model 3 deliveries scheduled for 2017

In a letter released with a quarterly earnings report, Tesla founder and chief executive Elon Musk: "Increasing production five-fold over the next two years will be challenging and will likely require some additional capital, but this is our goal and we will be working hard to achieve it."

Musk affirmed the company's plan to deliver 80 000 to 90 000 new vehicles in 2016, and said it was on track to begin deliveries of its keenly awaited Model 3 late 2017, which at around $35 000 will be priced at about half the cost of its Model S.

Read: Tesla's new Model 3 for SA: 'Definitely a game changer'

Tesla received more than 325 000 orders for its Model 3 during the first week it began taking deposits, despite never paying for advertising or endorsements, according to the company.

Watch: Customers line up to place Model 3 orders

A video posted by Tesla Motors (@teslamotors) on

Musk said: "This implies about $14-billion in future sales, making the Model 3 introduction the biggest consumer product launch ever.

"Since then, reservations have continued to grow to surpass even our expectations."

Musk theorised that the number of cars cranked out by Tesla, powered by batteries made in Gigafactory built in partnership with Panasonic, could ramp to a million by the year 2020.

Musk, referring to the Tesla plant in the Northern California city of Fremont, said: "We actually believe that Fremont and the Gigafactory could scale to a million. 

"Whether that is wise is another question."

Revenue soared to $1.6-billion

Long-term ramping of Tesla production would likely involve building factories on other continents, particularly Europe and Asian, to reduce costs of getting vehicles to customers, according to Musk.

In its quarterly results, Tesla said revenue in the past quarter climbed to $1.6-billion in a 45% increase from the same period a year earlier, while the company's net loss narrowed 34% to $75-million.

Musk said in the letter: "Our financial performance improved as well."

Tesla shares climbed more than 3% to $230 in after-market trades that followed release of the earnings report, regaining ground lost during the day after word spread that it was losing two key executives.

Executives hitting the road

One of the departing executives was Tesla vice president of production Greg Reichow.

After being with Tesla for more than five years and leading its production team for the past three, Reichow plans a leave of absence to "have a well-earned break," a Tesla spokesman said in response to an AFP inquiry.

Reichow will remain at Tesla until someone if found to replace him, according to the company.

Read: Tesla's new Model 3: 'Electric cars not yet a good buy for SA'

Musk said: "Greg and the team deserve a lot of credit for building an all-new manufacturing organization from the ground up and for making Model S and Model X a reality."

In a release statement, Reichow described the Tesla team as talented and committed, and that he strongly believes in the company's "ability to successfully deliver great cars and inspire the world to drive electric."

Tesla offered no comment on reports on the departure of another executive, Josh Ensign, who had been vice president of manufacturing.

Musk sleeps in the factory sometimes

Musk has moved his desk to the end of the assembly line and has a sleeping bag handy for overnights in the factory, he said during the call.

Musk said: "Tesla is really hell bent on being the world's best at manufacturing. What we are trying to do is get as many electric cars on the road as possible."

Model 3 was designed to be easy to produce, as opposed to the Model X, which Musk referred to as perhaps the most difficult car to manufacture.

Consumer Reports in April 2016 recounted a series of glitches with its new Model X electric sport utility vehicle, sending Tesla shares skidding.

Among the snafus cited: problems with the vehicle's "falcon wing" doors either not opening or not shutting; difficulties with the car's self-driving mechanism becoming "confused"; "double vision" distortions from the curved windshield; and insufficient heating.

Watch: Tesla shows off Model X's 'falcon wing' doors

A video posted by Tesla Motors (@teslamotors) on

Consumer Reports praised the California company's consumer service, but questioned "whether Tesla can keep up with the service issues" as output increases.

Tesla said the Model X's reliability trends are comparable with those on the Model S sedan, which has improved considerably over the last two years, and that it was working quickly to address any problems.

On April 11, Tesla announced the recall of 2 700 Model X vehicles to fix a locking hinge that could allow third-row seat backs to fold forward unintentionally.

Read more on:    tesla  |  elon musk  |  california  |  new models

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