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Musk Predicts Tesla Will Build 100K Model S, X in 2017

As financial losses grow, production and revenues climb faster.

by on May.04, 2017

Tesla CEO Elon Musk told analysts and reporters that the company will build more than 100,000 Model S and X units this year.

Tesla Motors’ losses increased by 40% during the first quarter, but Elon Musk, the company’s founder and CEO, hailed the fact that sales, revenue and production growth outpaced those losses: production was up by about 65% from last year’s first quarter to 25,000 vehicles and revenue doubled to $2.7 billion.

The Silicon Valley battery-carmaker reported a loss of $1.33 a share, significantly worse than the 81 to 83-cent loss various tracking firms had Wall Street trackers predicting. The company has turned a quarterly profit – using non-standard accounting – only twice since it went public.

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While Musk was quick to point out what is going right, it didn’t necessarily sway the investor community, which he has come to rely on in recent months.

Efraim Levy, equity analyst at CFRA Research on Tesla, kept a “sell” rating on the company’s shares, which have jumped 70% since last December. But even he called out the fact that Tesla’s first quarter revenues beat the consensus.

(To see more about Tesla’s first quarter results, Click Here.)

“In our initial impression, we note positive fundamentals including that the key Model 3 is poised to meet its targeted July production start, though we expect volume to be relatively modest at first,” Efraim wrote in a note to investors.

Levy added that the increase in cash to $4 billion should be sufficient through the end of 2017. Levy hit on an important point with many in the investment community: Tesla appears to be on target with Model 3 production.

Musk supported that assertion adding Tesla is now on track to build 100,000 Model S and the Model X vehicles this year even as it launches its first mass market car, the Model 3, this summer. With the launch of the Model 3, Tesla’s goal of building 500,000 vehicles in 2018 will be within reach. The company’s production could reach 1 million units by 2020, he said.

Musk dismissed concerns that the new Model 3 will cannibalize sales of the Model S, saying that the S is the company's flagship.

The Tesla founder also said the improvements in sales and revenue will continue this year as the company’s product line expands to include the more affordable Model 3.

“We’re going to produce 100,000 Model S and Model X,” he said. “All that matters is that will there demand and I think there will be,” said Musk, who added the Tesla also has started testing the Model 3 on the streets throughout the San Francisco area as a prelude to the start of production.

The Model 3 — a compact, electric car that is expected to sell for about $35,000 — is Tesla’s first “mass market” vehicle.

(Musk lays out plans for “Boring” company. Click Here to see how it plans to change the way we travel.)

Musk also said the Model 3 assembly line in Fremont, California, will be the most efficient in the industry.

Despite an “abundance” of positive news, Tesla shares were down 2.4%, to $303.50, in extended trading after the earnings announcement and Musk’s conference call with analysts.

“Tesla is on the verge of a major transition. This makes the last 3 months of financial performance far less critical than the next 3-to-6 months. Today’s earnings report will provide elements of Tesla’s long-term progress, but the rest of 2017 will truly define the company’s long-term viability.” said Karl Brauer, executive publisher of Auto Trader and Kelly Blue Book.

Musk declined to say whether orders for the Model S had fallen because buyers were waiting for the Model 3. But he underscored that the Model S would continue to set the brand’s benchmark by offering its highest level of assisted-driving capability and other features.

The Model 3, while it will be smaller and cost substantially less and have fewer features, will still incorporate much of the latest technology found on the top of the line Model S.

Musk also said that he was prepared to launch a cargo-carrying heavy-duty truck. “I am absolutely confident that electric vehicles will occupy every segment without exception,” he said.

(Consumer Reports downgrades Tesla Model S. Click Here to learn why.)

“We’re very proud of our overall accomplishments,” Musk said. “We’re actually doing well and I’m optimistic about our future. I am absolutely confident electric powertrains will affect anything.”

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