Tesla's Model 3 Is Now America's Best-Selling Electric Car

It’s official: Tesla’s new Model 3 is now the best-selling electric car in the U.S.

Tesla Inc. released its production numbers for the first quarter 2018 on Tuesday. The company delivered 8,180 Model 3s in the first three months of the year. That compares with 6,468 deliveries for Toyota Motor Corp.’s Prius Prime plug-in hybrid and 4,375 for General Motors Co.’s Chevy Bolt.

Coming out on top is no small feat for a company that’s been manufacturing vehicles for barely a decade. However, huge hurdles remain as Palo Alto, California-based Tesla tries to turn the page on one of the most difficult chapters in its short history.

Earlier this year, Bloomberg launched an experimental model to track Model 3 production using vehicle identification numbers (VINs). Our final estimate came in just 5 percent less than Tesla’s reported numbers, arguably validating the methodology. That’s not great news for Tesla fans, because our model suggests the company may have exaggerated its production capabilities at the end of last year. In the coming weeks, Tesla will need to prove that it can sustain and build upon the peak weekly production rates it just announced.

Wall Street was pleased with the production numbers but hardly elated: “Good enough,” wrote Robert W. Baird & Co. analyst Ben Kallo. KeyBanc Capital Market’s Brad Ericson said the numbers were “better than feared.” Consumer Edge Research LLC analyst James Albertine, who remains bullish even after Model 3 production missed his estimates, said, “Our hope is that subsequent ramps in production may be easier.”

Tesla Rises to the Top

The Model 3 leads U.S. deliveries in the first three months of 2018

There’s reason for such skepticism. If we go back to Tesla’s fourth-quarter numbers, released in January, the carmaker said it had made 793 Model 3s “in the last seven working days” and achieved a production rate of 1,000 a week in the last few days of the quarter. At the time, those extrapolated weekly rates were the only positive news during an otherwise miserable start to production.

However, our model showed that Tesla didn’t sustain 793 cars a week until mid-February and didn’t hit 1,000 cars a week until mid-March. So what are investors to believe of Tesla’s latest pronouncement that it’s now broken the 2,000-per-week barrier—itself lower than Tesla’s 2,500-per-week forecast—on the way to 5,000-perweek in the next three months?

Bloomberg’s weekly estimates are averaged over time and wouldn’t register a sudden end-of-quarter production blitz. The Trend feature is a better indicator after a big swing in the production rate but is subject to sudden revision if production rates aren’t sustained. Source: Bloomberg

Looking at Tesla’s weekly rate is a bit like asking a marathon runner the fastest they can run a mile. It might be interesting, but when they have to go back to running marathons, how much bearing does it have on their endurance rate?

On Tuesday, Tesla tried to allay fears of sustainability—given its last minute-push to 2,020 cars during the final seven days of March—by saying it will produce 2,000 this coming week as well.

Even if you believe that Tesla is closer to getting back on track with Model 3 production, the California automaker isn’t out of what CEO Elon Musk calls “production hell” just yet. Musk said on Twitter Monday that he’s “back to sleeping at the factory” while trying to fix production delays with the Model 3. That’s not the way a CEO typically celebrates a successful quarter.

That said, two weeks of production above 2,000/week would at least suggest that Tesla’s biggest bottleneck—at its battery factory in Nevada—may be over. Early in the quarter, Tesla was struggling to make 500 battery packs a week, according to the Bloomberg tracker. Tesla reported in February that a new battery production line had been built at its Grohmann Automation labs in Germany and was scheduled to be installed last month.

If Musk, 46, is instead camping out at his Fremont, California, assembly line, that suggests his attention has shifted from batteries to the next bottleneck in car assembly. “Car biz is hell,” Musk said.

Other key takeaways from Tuesday’s announcement:

Tesla’s Q2 forecast eases cash concerns. Tesla said it “won’t require an equity or debt raise this year, apart from standard credit lines.” Investors were anticipating a need for as much as $3 billion in additional capital for the production ramp.
Investors are pleased. Shares rose in early trading as much as 6.9 percent.
Total Model 3 production for the quarter was 9,766, compared with a final estimate of 9,285 made by the Bloomberg production tracker.
Tesla maintained its targets. Model 3: 5,000 cars produced each week by the end of Q2. Model S and X: 100,000 deliveries in 2018. Tesla foresees a rapid increase in production this quarter.
See the full Tesla statement here.

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