Tesla’s plan to launch Model 3 by 2018 worrying parts makers

Tesla’s plan to launch Model 3 by 2018 worrying parts makers

New plans related to production of Model 3 have surprised parts makers. The automotive company has planned to launch its Model 3 by 2018, which is two years prior to what earlier was decided. Supplier executives and industry consultants are showing concern over hard to achieve target that would also be costly.

The company in past three months has increased its production projections by twice to 100,000 Model 3s in 2017 and 400,000 in 2018. Tesla has already taken 373,000 orders for the Model 3, whose starting cost is $35,000, which is half the cost of Model S. The company said that it would start delivering cars to customers by the end of next year. The company this time made no promises learning from their previous experience when its customers had to wait for months for delivery.

On an April call, Tesla’s chief Executive Elon Musk told analysts that in response to tremendous demand, the company is planning to increase its total production, including production of Model S and Model X crossover to 500,000 in 2018, which is two years earlier than targeted. The company also has made a 10-fold increase over the 50,000 vehicles in the year 2015.

The new target demands suppliers to prepare for Model 3 production test in July 2017. This is seen by many as unachievable, but still Musk said the target it needed to achieve to reach production goals.

"The reason is that even if 99 percent of the internally produced items and supplier items are available on July 1, we still cannot produce the car because you cannot produce a car that is missing 1 percent of its components," said Musk.

"The proceeds from the latest stock offering will be used mainly to pay for $2.25 billion in capital investments Musk has said will be needed this year to prepare for high volume production of the Model 3. As of March 31, Tesla had $1.44 billion in cash and cash equivalents," according to a news report published by Fortune News.

Tesla previously has raised more than $4.5 billion in debt and equity offerings over the past six years. Since it raised$226 million in an initial public offering in June 2010, Tesla has gone back to the capital markets several times. Tesla said it has 373,000 reservations from customers who want the Model 3 sedan, which will be a smaller, less expensive companion to the current Model S sedan and Model X sport utility vehicle.

According to a story published on the topic by Reuters News, "Citing "tremendous demand," Chief Executive Elon Musk told analysts on an April call that the company planned to boost total production, including the existing Model S and Model X crossover, to 500,000 in 2018 - two years earlier than its original target and a 10-fold increase over the 50,000 vehicles it made in 2015. Musk said Tesla told suppliers to prepare for Model 3 production tests in July 2017, a goal he acknowledged may be unrealistic for some. But he said the "aggressive" target was necessary to reach production goals."

Musk said the Model 3's simpler design, new production hires and enthusiastic suppliers would help the company make its goals. He said Tesla would drop suppliers that could not meet deadlines and would bring more parts production in-house than traditional automakers typically do. He did not specify how much or which parts. "It's very important for us to have the ability to produce almost any part on the car at will because it alleviates risk with suppliers."

"FCA already has the talent and the money, and the underlying machinery is already installed in the plant," said one longtime supply sales executive. "They're aiming to be up and running in 2018, so they have two years – and suppliers are wondering if they'll make that deadline." Tesla says the Model 3 features 6,000 to 7,000 unique components, fewer than the typical automobile with a combustion engine and the Model S, which has more than 8,000 parts.

A report published in Digital Trends revealed, "In earlier statements the company had implied it took 400,000 orders in April alone. CEO Elon Musk also said in early May that combining the end of 2017 first shipments and the full year 2018 cars, anyone who wanted to be sure to be on the list for 2018 delivery should get their order in soon."

“We have obtained this level of reservations without any advertising or paid endorsements, with only a few social media posts leading up to the March 31 unveiling, without anybody but those who were in attendance on March 31 having had an opportunity to test drive the car, without yet publicly disclosing numerous features about the car, and with almost no attempt to drive customers to make Model 3 reservations since the week following the March 31 unveiling. If we wanted to, we believe that we could further increase the number of Model 3 reservations with minimal effort, but believe it is better to guide customers to purchase products currently in production.”