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Tesla moves up production schedule for Model 3 radically, eyes mass market by 2018

In aggressive push to the mainstream, automaker plans to produce 500,000 cars per year starting in 2018, about five-times more than it's ever built


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PHOTO: Alexis Georgeson/Tesla

Tesla has only produced about 110,000 vehicles in its less than ten-year history, now it plans to churn out half a million cars a year. PHOTO: Alexis Georgeson/Tesla

DETROIT—Facing production problems with its new SUV, electric car maker Tesla Motors Inc. posted a big loss for the first quarter of 2016 May 4—but yet again, investors were not particularly deterred.

Cheering the news the niche automaker is on target to meet its delivery goals this year and bring its new, low-cost car to market by 2017, share were up in after-hours trading, and opened higher May 5.

Tesla’s loss rose 84 per cent to US$282 million in the first quarter as it struggled with parts delays for the Model X SUV. Also, the company’s stock-based compensation costs more than doubled during the quarter to nearly $90 million.

The loss, of $2.13 per share, far exceeded Wall Street’s forecasts. Analysts polled by FactSet expected a loss of 87 cents per share.

The Palo Alto, California-based company said Model X production improved in March and that it remains on track to deliver 80,000 to 90,000 new vehicles this year.

Meanwhile, the company’s CEO, Elon Musk, announced another significant, if not radical, shift in the company’s letter to shareholders. The electric vehicle maker says it’s pushing ahead its plan to make 500,000 vehicles per year to 2018—two full years earlier than scheduled. That would help get the Model 3, Tesla’s lower-cost car, into customers’ hands more quickly.

No small undertaking, the massive scale-up would see Tesla produce nearly five-times more vehicles per year than it has produced in its entire history beginning in jut two years.

“Increasing production five fold over the next two years will be challenging and will likely require some additional capital, but this is our goal and we will be working hard to achieve it,” Musk said in the letter.

The aggressive push is a response to the widespread interest in its mass-market Model 3, which Tesla claimed was “the biggest consumer product launch ever.” Unveiled March 31 with a starting price of around $35,000, the Model 3 will be Tesla’s most affordable car ever. Garnering widespread consumer interest, the automaker secured more than 325,000 pre-orders for its new vehicle in the first week alone.

Tesla also racked up hundreds of thousands of $1,000 deposits on the new car while putting itself in a position to collect more than $14 billion in future sales—so long as it can deliver.

A key part of its revised production schedule, Tesla said construction on its Nevada Gigafactory is continuing on-schedule and should begin producing batteries before the end of the year.


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