We were starting to worry about Tesla’s 4th quarter (Q4 2022), and why not? The all-electric car company saw its second quarter profit fall 32% from record levels in the first quarter. Supply chain issues and pandemic lockdowns in China slowed production of its vehicles.
Yet now, there is a report circulating that Tesla plans to push global production of its top selling Model Y and Model 3 vehicles sharply higher in the 4th quarter. Moreover, as it continues to build on that growth in 2023 — with newer factories in Austin and Berlin ramping production — the company output forecasts show an upward trajectory.
Tesla’s 4th quarter is suddenly looking quite bright. If company goals can be achieved — as the company seems to expect — Q4 Tesla production would put the EV maker on track to meet CEO Elon Musk’s goals of 1.5 million possible units for 2022. Internal plans reviewed by Reuters indicate that “the production plans would see Tesla blow past projected growth in the global market for autos by close to a factor of 10 in 2023 with a production increase of over 50% for the year.”
Could it really be so?
Sources told Reuters last week the plan was to run production at 20,500 vehicles a week for the remainder of the year.
At Tesla’s 2022 Annual Meeting of Stockholders in August, Musk projected that the company aimed to hit a production run rate of 2 million vehicles per year by the end of 2022 and would continue building factories to meet those production goals. In a Securities and Exchange Commission (SEC) filing, Tesla said it intends to continue to accentuate its battery development, among other projects, to solidify its corporate plan and mission. “The long-term success of this business,” Tesla explained in the filing, “is dependent upon increasing margins through greater volumes.”
Part of the current company optimism is rooted in the fact that Tesla has risen to #1 in the auto industry in terms of operating margin.
Tesla has the highest operating margin in the whole auto industry – Elon Musk pic.twitter.com/RN0drMkYpY
— TeslaGiga4 (@TeslaOwnersDE) August 4, 2022
Can the Model 3 and Model Y Carry the Company?
Tesla divulged on October 2 that it produced over 365,000 vehicles and delivered over 343,000 vehicles in the third quarter. Noting that delivery volumes have skewed towards the end of each quarter (as long as Tesla has been delivering cars) due to regional batch building of cars, the company stated that logistics analysis looks to increased efficiency as volumes increase. “As our production volumes continue to grow,” the company began, “it is becoming increasingly challenging to secure vehicle transportation capacity and at a reasonable cost during these peak logistics weeks.”
Tesla began transitioning to a more even regional mix of vehicle builds each week during Q3, which led to an increase in cars in transit at the end of the quarter. “These cars have been ordered and will be delivered to customers upon arrival at their destination,” the company explained.
Tesla had a solid three quarters in 2019, dropped a bit during the Covid-19 lockdowns of 2020, and then has been on an almost consistently steady and steep rise since then. The Q4 Tesla forecast, which jumpstarts the next 4 consecutive quarters, starts with an ambitious target to produce almost 495,000 Model Y and Model 3s, according to Reuters. Those two models account for about 95% of Tesla’s output.
The confident prediction about Q4 Tesla and beyond emerged despite lingering supply chain risks, a slowing economy, rising competition, and falling Tesla order backlogs.
On the other hand, adding to the equation are positive indications that Tesla will experience continued growth through 2023.
It’s All about Berlin & Austin for Q4 Tesla
The forward-looking forecast hinges on a sharp gain in output in Tesla’s newer, expansive, and expensive factories in Germany and Texas. Production in Austin would jump to almost 101,000 by the end of the third quarter of 2023, in contrast to the production trickle of late May, when Musk had said new factories in Texas and Germany were losing billions of dollars, comparing them to “gigantic money furnaces.”
Elon Musk on Tesla's new plants: “Both Berlin and Austin factories are gigantic money furnaces right now” https://t.co/adPSUGArpq
— Bloomberg (@business) June 23, 2022
Tesla revealed earlier this year that it focused investments intensely on its gigafactories during the second quarter of 2022 — to the tune of about $1 billion in capital expenditures. Furthermore, at Tesla’s annual stockholder meeting, Musk said he thought the automaker could eventually build as many as 10–12 gigafactories throughout the world.
Arguments supporting the Q4 Tesla growth forecast are counting on successes in Berlin and Austin. The production facilities will maximize the company’s innovation, safety record, and performance, and may also provide advantages over combustion engine vehicle makers.
Elon Musk confirmed recently that expansion plans at Tesla Gigafactory Texas will allow for more green space that may evolve into a kind of “ecological paradise.” The revised application added 12 acres to the site’s limits of construction and 522,720 feet of space to the automaker’s electric vehicle production factory. Production in Austin should jump to almost 101,000 by the end of the third quarter of 2023.
By Christmas Tesla’s Berlin and Texas factories will be producing EVs for less than the cost to make a similar size old world Toyota. Parity point passed in 2022. New ICE sales will likely plummet faster than EV production grows due to fear of zero resale value. Good.
— Carl Sparre 🇺🇦 ❤️ (@CarlSparre) August 29, 2022
Sam Fiorani, vice president of global forecasting at AutoForecast Solutions (AFS), which tracks production, said it would not be a surprise to see big jumps in output for Tesla from plants in Austin and Berlin since those plants have been running below capacity. “Berlin and Austin are coming into their own next year, and that’s where a lot of this volume is coming from,” he said.
2k Model Y built at Giga Berlin this week 🤘 pic.twitter.com/4u4I517wdV
— Tesla (@Tesla) October 1, 2022
Joerg Steinbach, the regional economy minister of Brandenburg, where Tesla has its factory near Berlin, has said Tesla would be moving to 3 shifts at the plant by the end of the year. The expected gain would be from 51,000 vehicles produced next quarter to almost 90,000 produced in the quarter ending September 2023.
The Cybertruck as a Boat, Says Musk, Elon Musk
Since we’re all feeling so good about Tesla, let’s end on a high note, shall we?
During the Q2 2022 earnings call, Musk said the Cybertruck would enter production in mid-2023 and might actually be Tesla’s “best product ever.”
At the end of last month, we who have loved the cultural experience of James Bond flicks couldn’t help but smile when Musk spoke again about the upcoming Cybertruck — but now referred to its built-in ability to float for short periods of time.
Cybertruck will be waterproof enough to serve briefly as a boat, so it can cross rivers, lakes & even seas that aren’t too choppy
— Elon Musk (@elonmusk) September 29, 2022
A favorite of many Bond aficionados is the icon 1977 Lotus Esprits that was converted to submarine form for The Spy Who Loved Me. Musk spent $1 million to buy the movie prop car — one-part sophisticated road machine and one-part submarine. Coincidence? I think not. 🙂
The CEO did scale back original specifications and pricing when he spoke about the Cybertruck at the shareholder meeting. “I think there’s no way to have anticipated quite the inflation that we’ve seen.” Tesla will be “installing the production equipment, tooling and all, starting in the next couple of months” at its Austin, Texas, factory to get Cybertruck production up and running.
The good humor is likely to follow.
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