Tesla Hits Model 3 Production Milestone

Elon Musk, CEO and founder of electric car startup Tesla, announced July 1 that his company succeeded in meeting his goal of producing 5,000 units of its Model 3 in the final week of the second quarter. The Model 3, billed as an affordable alternative to Tesla’s higher-end Model S, had previously seen a number of production setbacks that raised doubts about the company’s ability to meet the goal. Early incarnations of the Model 3 production line were found to be inefficient due to excessive dependence on automation while battery issues initially confounded efforts to scale up production numbers. By reaching this milestone, though, Tesla manufacturers have demonstrated their ability to overcome such obstacles.

How Tesla built 5,000 units in one week

Although it was certainly a remarkable achievement, Tesla manufacturers had to go to unusual lengths to meet the goal of manufacturing 5,000 cars in a single week. The final week of the second quarter saw an unexpected expansion of manufacturing capacity at the company’s factory in the form of a third production line set up in a large tent outside the facility. Tesla also brought on a considerable number of new employees to supply the necessary labor force. To oversee the entire project and ensure that he would constantly be on hand to direct the work, Musk even began sleeping at his company’s factory. This hectic model and breakneck pace of work, however, proved to be worthwhile. In a companywide email Musk sent out once the production goal had been officially met, he described the implications of the achievement for the company by saying, “I think we just became a real car company.”

What this development means for Tesla

Public opinion is divided on how much bearing the production of 5,000 Model 3s in a single week actually has for Tesla. Though it is certainly a major achievement and a huge step toward filling the roughly 450,000 Model 3 orders that have already come through, some doubt exists as to whether or not Tesla will be able to replicate the feat. Because of the sheer effort and 24-hour operation that went into producing that many vehicles in such a short period, some investors and analysts believe that production numbers will return to more normal levels in the coming weeks. This perception also caused Tesla’s stock to drop after a brief spike the morning of July 2. Additionally, Tesla is continuing to burn through existing cash reserves, raising concerns that Musk may need to seek another round of outside funding before the year ends.

Despite some bearish takes on Tesla, the strides its manufacturers made to facilitate higher production levels will almost certainly have a positive impact on the company in the long term. Even if they don’t immediately replicate this achievement, Tesla manufacturers now have many of the initial production method kinks worked out. They can also now more formally integrate the additional production line they set up and the extra employees they hired to make the milestone possible into the existing manufacturing process, which will likely set Tesla up for similar successes in the near future.

What’s next for Tesla?

Musk falls heavily into the camp of Tesla bulls who believe that the company will not only be able to continue producing 5,000 cars per week but also scale up regularly from here on out. In his email to his employees, Musk detailed his vision of expanding Model 3 production to 6,000 cars per week by next month. The advances in productivity required to ramp up production of the Model 3 can now also be applied to the vehicles Tesla hopes to roll out in the future. As these models go into production, it is not at all unlikely that Musk will push his company to reach similarly challenging quotas for them as well.

Meeting the goal of building 5,000 Model 3s in a week is a monumental achievement for Tesla. Though perhaps not on the same level, all manufacturers understand the challenges involved in scaling up production. Labor, materials, logistics, and equipment all come into play when manufacturers are enhancing their facilities, making it a complicated and dynamic process.

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