Tesla may have steered itself away from a financial precipice, after the US electric carmaker announced that it had finally started to produce its Model 3 on a scale that could lead it to the mass market.
Faltering production of the latest, cheapest model of its electric supercars had been a factor in a downgrading of Tesla’s credit rating, plummeting share price and deepening industry scepticism.
But on Tuesday the California-based firm said it had made more than 2,000 Model 3 vehicles in the past seven days – still some way below Tesla’s original target of 5,000, and short of the 2,500 per week it had since scheduled for this March, but a healthier figure than many analysts had suspected.
Tesla said it had doubled the production rate over the first quarter of 2018 by addressing bottlenecks in its production process and supply chain, including shutting down its factory for several short periods to upgrade its equipment.
It admitted that delays had lost it some customers for the Model 3 but said that net orders remained stable.
The firm, led by tech entrepreneur Elon Musk, claimed that its exponential rate of increased production was so fast that it would, if continued, trump that of Ford’s Model T. Tesla said production of its Model 3 would now start to exceed that of its luxury Model S and X electric cars, and it would continue to aim for its stated target of 20,000 cars per month by the summer – a rate that would give it “the long-sought ideal combination of high volume, good gross margin and strong positive operating cash flow”.
The carmaker added that it would not need to seek additional financing this year as a result, other than borrowing on its standard credit lines.
Its share price, which had dropped by more than a third in six months on fears for the firm’s future, rallied on Tuesday by 7% after news of the higher production rate.
Tesla’s announcement came two days after Musk issued a jokey series of tweets on April Fools’ Day that only served to fan further speculation about the company. The chief executive said that despite efforts including “a last-ditch mass sale of Easter Eggs, we are sad to report that Tesla has gone completely and totally bankrupt”. A photograph showed Musk apparently slumped unconscious beside a Model 3, holding a cardboard sign reading “Bankwupt”.
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Concerns over the company’s finances had been rife, with the credit rating agency Moody’s downgrading Tesla’s rating last week. Moody’s warned that the company might need to raise another $2bn (£1.4bn) to remain solvent, and that its rating was likely to be downgraded further if it failed to meet its production targets. Whether Tesla’s latest showing will avert further gloom remains in the balance: Bruce Clark, a Moody’s analyst, told the Financial Times on Tuesday: “It’s one thing to pull out all the stops in the last week or so of the quarter, and another to maintain that level of production on a sustainable basis.”
Confidence in Tesla could also take a further knock following the death of a second driver who was using a Model X in its self-driving mode, Autopilot, raising questions over the firm’s pioneering technology. Tesla confirmed last week that the driver who died in a crash on 23 March had set the car to cruise control without his hands on the wheel, and said he had apparently not responded to warnings. Another Tesla driver died with his car on Autopilot in 2016.