Tesla seeking profitability with launch of lower priced Model 3s

Sales of Model 3 to start in Europe and Asia in 2019

2019/01/31

Summary

  At the end of June 2018, Tesla achieved its weekly production target of 5,000 units for the Model 3, its affordable EV compact sedan. The Model 3 production system has stabilized and its sales have increased since the third quarter of 2018. Tesla’s deliveries in 2018 grew approximately 2.4 times over the previous year to 244,920 units, of which 145,610 units were Model 3s, up from 1,770 units.

  Deliveries of the Model 3 were limited to North American customers, higher priced grades, and cash/loan transactions only. There still remain opportunities to expand deliveries of the Model 3 as Tesla begins its sales outside North America, launches lower priced grades, and introduces leasing options.

  In July 2017, Tesla released the Model 3, but, due to bottlenecks on the automated assembly process, it was not able to ramp up its output as planned and experienced an increase in operating losses in the first and second quarter of 2018. In the third quarter, the production system of the Model 3 stabilized, and the automaker gained an operating income of USD 416.76 million owing to an increase in deliveries and reductions in labor and material costs. This was a significant improvement from an operating loss of USD 621.39 million in the second quarter and an operating loss of USD 535.48 million in the third quarter of 2017. While Tesla plans to launch lower priced grades of the Model 3 in the near future, it aims to gain profitability by improving cost efficiencies including a 7% employee reduction as well as expanding sales further.

  In 2019, Tesla is scheduled to start deliveries of the Model 3 in Europe and Asia, and debut the Model Y, a new compact SUV, and a new pickup truck. In 2020, the automaker plans to begin production of the Semi electric truck, new Roadster, and Model Y.

  In China, Tesla lowered prices of its vehicles in November 2018 to suppress the negative impact of increased tariffs on its vehicles imported from the US. In January 2019, the company broke ground on its assembly plant and R&D center in Shanghai. The first Model 3 is scheduled to roll off the line at the end of 2019 with an initial production capacity of 250,000 units per year which will be raised to 500,000 within three years.

  In October 2018, Tesla added a new feature to the Enhanced Autopilot. The new Navigate on Autopilot feature enables the Tesla vehicle to automatically change lanes on freeways, transfer from one freeway to another, and ultimately exit the freeway when approaching the final destination. In November 2018, the Summon autonomous parking feature was upgraded.

Model 3 Performance Model 3の追加組立ライン
Production of the Model 3 started in July 2018 (Photo: Tesla) An additional Model 3 assembly line built in the large tent (Photo: Tesla)

 

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