Yesterday, we mentioned how Tesla was behind schedule with its everyman Model 3 — delivering only 220 units to the half-million reservation holders since the start of production in late July. While we knew it would get off to a slow start, CEO Elon Musk previously assured the public that production would increase exponentially through the end of the year by way of a “production hell” trial by fire.
Musk claimed there should be “zero concern” about Tesla achieving a production rate of 10,000 cars a week before the end of next year. But many wondered if that was even possible. Despite Tesla making serious strides to increase production volume this year, we remained dubious that the proposed numbers were even feasible for a fledgeling automaker.
As it turns out, they weren’t — and the company knew it.
In an application for sales tax exemption from the CAEATFA program filed early this year, the California Treasurer revealed that Tesla had production capacity of the Model 3 pegged at 226,563 units per year over a five-year span. But that wasn’t what was being promised by Musk or the rest of Tesla’s executives.
Brought to light by the Daily Kanban, the filing shows quite a disparity between what the automaker told the California Treasurer and what it told its investors. The figure in the tax exemption document doesn’t meet Musk’s 10,000-unit week nor the company’s 5,000-per-week goal for the end of 2017.
Granted, 5,000 units is a nice round number to hang your hat on. So Musk can be forgiven for not explicitly stating the number will be closer to 4,356. But it’s misleading when you take into account the company’s 10,000 unit claim — even if you throw both the Model S and Model X’s expanded production volume into the mix.
At the very least, Tesla should be condemned for being mildly deceptive. It’s either low-balling the data being given to the California State Treasurer’s Office or puffing up product claims for its investors. Either way, it doesn’t look to be genuinely confident that it can hit Musk’s target volume of nearly 1 million vehicles in 2020.
Teething issues with the Model 3 aren’t the issue. We all knew the company has set extremely ambitious production goals for itself in a fairly short timeframe. Falling incredibly short of September’s target of 1,500 cars isn’t a big deal. But it might be worth considering that Tesla is telling two groups entirely different stories.
From the Daily Kanban:
“To understand just how misleading Musk’s statement was, some context and math is necessary. A previous [sales tax exemption] request, reported exclusively by Daily Kanban, revealed that Tesla is expanding annual production of its “Gen2” vehicles (Models S and X) to 195,000 units per year, or about twice current sales levels. Add that to the 226,563 average in the most recent [sales tax exemption] application and you get a total annual production rate of 421,563 units per year for Tesla’s entire product line. Divide that number by 52, and you get a weekly production rate of 8,106 vehicles per week.”
However, we’re still a long way from that becoming a reality. Tesla only delivered a total of 47,077 vehicles through the first half of 2017. Yet the company told the media prior to the January filing that it planned to build 500,000 vehicles in 2018 — a five-fold increase from its current production schedule.
We get that you have to play the hype game to compete in the car-building business. But Tesla might be playing a little too fast and loose when it comes to estimating its production volume.
[Image: Tesla Motors]