Tesla Inc (NASDAQ:TSLA) released its Q1 production numbers this morning before opening bell, and perma-bulls who were calling for a stock rally after the release ended up being correct. Total Tesla Q1 production grew 40% quarter over quarter to 34,494 vehicles, but what may be the bigger surprise is that the automaker was apparently not far from its next weekly target for Model 3 production.
Tesla Q1 production numbers offer positive surprise
Tesla produced 9,766 Model 3 cars during Q1, which was a fourfold increase from the previous quarter. In the last seven days, the company produced 2,020 of the mass-market electric car, although it expects to produce about 2,000 of them in the next seven days, along with 2,000 Model S and Model X vehicles. Tesla also emphasized that it is now producing more Model 3 cars than the combined number of Model S and Model X vehicles it is producing weekly.
The automaker said it delivered 29,980 vehicles in Q1, including 11,730 Model S sedans, 10,070 Model X SUVs, and 8,180 Model 3 cars. Additionally, the company recorded another record high in the number of vehicles that were in transit at the end of the quarter. It had 2,040 Model 3 cars and 4,060 Model S and Model X vehicles in transit at the end of Q1, marking a 68% quarter-over-quarter increase. These deliveries will be counted toward the Tesla Q2 delivery numbers, and the company said that this keeps it on track for meeting its previous delivery outlook for Model S and Model X vehicles in all of 2018.
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Tesla also reported that net Model S and Model X orders reached a new record high during Q1 as demand for them remains strong, despite bear concerns about demand for the company’s more expensive vehicles. Net Model 3 orders held steady through the first quarter, although the company did admit that some customers are canceling their orders.
It added that most of the cancellations are “due to delays in production in general and delays in availability of certain planned options, particularly dual motor AWD and the smaller battery pack.” This seems to confirm the analyst survey which indicated that customers wouldn’t tolerate a long delivery delay for the Model 3.
Tesla addresses production bottlenecks
The statement revealing the Tesla Q1 production numbers indicates that the company doubled the number of Model 3 cars it was producing per week during the first quarter “by rapidly addressing production and supply chain bottlenecks, including several short factory shutdowns to upgrade equipment.” The automaker also expects the Model 3 production rate to increase “rapidly” throughout the second quarter.
Tesla now expects the Model 3 production rate to reach about 5,000 cars weekly in approximately three months’ time. The automaker said that this milestone will lay “the groundwork for Q3 to have the long-sought ideal combination of high volume, good gross margin and strong positive operating cash flow.” Tesla management doesn’t expect the company to need a debt or equity raise this year beyond the current credit lines. This is certainly good news for Tesla stock bulls, as bears have been arguing more and more often that the clock is ticking on the next debt raise.
The automaker also addressed the growing concerns about the quality of the Model 3 cars that are being delivered to customers. There have been several reports raising concerns about poor quality, but Tesla states that the quality has reached “the highest level we have seen across all our products.” The automaker also claims that the customer satisfaction score for the Model 3 is higher than 93%, which is a record high.
Following the release of the Tesla Q1 production numbers, the company’s stock initially rose more than 7% in premarket trading before reversing course. Tesla stock is up 2.27% at $258.21 at the time of this writing.