When Will Tesla’s Model 3 Outsell The Model S?

by Trefis Team
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Tesla’s (NYSE:TSLA) mass-market sedan, the Model 3, has seen robust demand thus far, with the company notching over 500k bookings for the vehicle as of July last year. However, the vehicle’s prospects will ultimately hinge on Tesla’s ability to ramp up production, which has missed some schedules and expectations. In this note, we take a look at how Tesla Model 3 production could scale up over the next three quarters while comparing it with projected sales of the Model S and Model X.

We have created an interactive dashboard analysis that outlines our forecasts for Model 3 and Model S sales. You can modify the drivers to arrive at your own estimates for Tesla’s automotive revenues over the next three quarters.

Production Overview

Production of the Model 3 has proven more difficult than Tesla had anticipated, as the manufacturing process deploys significantly more automation compared to the process for the higher-end vehicles, making it challenging to bring processes online at the early stages of the production ramp. Tesla’s guidance for Model 3 assumes that it will reach production levels of 2,500 Model 3 cars a week by the end of Q1 2018 and 5,000 a week by the end of the second quarter. However, Tesla has had some difficulty meeting production expectations in recent quarters. For example, it initially planned to hit the 5k cars per week milestone at the end of 2017.

The company said that it made 793 Model 3s in the last few days of 2017, indicating that its weekly production run rate exceeded 1,000 Model 3s per week.  If we assume that Tesla improves on this 1k per week production rate over the quarter, its Model 3 deliveries could reach 14k units for Q1. As Tesla expects deliveries of its premium Model S and X vehicles to remain essentially remain flat from the 2017 figures, there is a possibility that the Model 3 could eclipse deliveries of the Model S early this year. Moreover, the Model 3 could become Tesla’s biggest revenue generator as soon as Q2 2018.

Breaking Down Tesla’s Deliveries By Model

The charts below show our near-term forecasts for Tesla’s deliveries by model. You can modify the forecasts on our interactive dashboard to see how changes would impact the company’s results.

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