I was pleasantly surprised to see the Company Update from Tesla arrive tonight. I saw the announcement of Jerome Guillen into the President of Automotive position as a big positive. Guillen is an eight-year Tesla veteran with tons of positive experience. The new general assembly line for Model 3 has been attributed to him. He appears to have excelled at every project he has managed at Tesla.
While this and the other personnel announcements are great, I initially overlooked something just as interesting. From the email:
“We are about to have the most amazing quarter in our history, building and delivering more than twice as many cars as we did last quarter.”
This is big, but to understand it, we need to do some math.
Production & Delivery Math Time
In Q2, Tesla delivered 40,740 vehicles. 40,740 * 2 = 81,480 vehicles in Q3. [Editor’s note: Say what?!?!?!?]
In Q1, Tesla sold 21,800 Model S and X cars. In Q2, it was 22,300 Model S and X.
If Model S and X stay at that level, that would mean at least 59,000 Model 3s are delivered in Q3.
Let’s look at a different scenario. In Q4 2017, Tesla had it’s best ever quarter for Model S and X deliveries, with 28,320 vehicles delivered. If those vehicles are once again delivered at this high rate, that still means there would need to be at least 53,160 Model 3s delivered to achieve the doubling of cars quarter to quarter.
Editor’s note: It’s not clear if “building and delivering more than twice as many cars as we did last quarter” only applies to total deliveries or if Tesla means that production in Q3 will also be more than twice what it was in Q2. Looking at production, Tesla reported that it produced 53,339 cars in Q2. Double that would be 106,678. It seems highly unlikely that Tesla will reach production of 107,000 vehicles in Q3, so we’re conservatively assuming that “building and delivering more than twice as many cars as we did last quarter” just means that Q3 deliveries will be more than double Q2 deliveries.
What the Math Tells Us
Tesla production guidance for the Model 3 was 50,000–55,000 for Q3. In the “worst case” scenario for Model 3 production above (which would probably be the “best case” for cash flow), Tesla falls comfortably into the upper half of its guidance and produces more than 4,000 Model 3s per week.
In the best case for Model 3 production, Tesla beats its guidance by more than 7%, with more than 4,500 Model 3s produced per week.
A lot happened to Tesla on Friday. Guillen may be the bigger news long term, but don’t underestimate this implication regarding Tesla production and sales.