Tesla Motors Inc (NASDAQ:TSLA) CEO Elon Musk on Sunday said Model 3 reservations – that started pouring in on March 31 when the company unveiled the smaller electric sedan – have topped 276,000, miles ahead of what analysts were expecting and what the company was hoping for.
While this goes on to re-iterate the fact that demand really is not a problem for the Silicon Valley based automaker, the strong surge in orders has drawn many Wall Street analysts back to the core issue for Tesla: Production capacity.
Tesla still relies on a single manufacturing plant in Fremont California that it uses to build both the Model S and the Model X and while the company’s sales have been growing impressively over the past, overall volumes are still manageable given the niche market Tesla is operating in for now.
But next year, when Tesla says it will start producing the Model 3, problems could mount given the Model 3 which starts at $35,000 will appeal to a larger group of car buyers. For unprofitable Tesla, it will dearly want to fill the piling orders as early as possible, but based off of a single manufacturing plant some analysts claim many people who reserved their Model 3 on March 31, or the day after, may still have to wait perhaps until 2020 to get hands on the Model 3.
Notably, Tesla has faced production delays especially for the earlier batches for both the Model S and the Model X, and while the Model 3 will likely be easier to build (assuming its less sophisticated than the S or the X) churning out large volumes of the mass market electric vehicle, while simultaneously filling in S and X orders could turn out to be a tough challenge for Tesla.
Some analysts are already claiming Tesla will need a major funding round soon to invest in production capacity. The urgency for Tesla also has merit because much of the success of the Model 3 will depend on how soon Tesla can attack the mass market for electric vehicles.
The mass EVs market is already lead by Nissan’s electric Leaf and plug-in hybrids such as Chevrolet Volt and the Toyota Prius. Furthermore, mainstream more resourceful automakers are also busy developing their versions of Tesla Model 3 killers. Leading that pack is GM’s Chevrolet Bolt – also a battery-powered 200 mile range EV – that is slotted for a rollout later next year, around the time Tesla has said the Model 3 will be hitting roads.
If Tesla is slow in ramping up production of the Model 3, or worse still, delays initial deliveries, it could run the risk of giving vehicles like the Chevy Bolt an edge.