During its Q3 earnings call, Tesla Motors Inc (TSLA - Get Report) said that it expects to deliver 6,000 vehicles in the current quarter. But Barclays PLC (BCS) (BARC) analyst Brian A. Johnson says, looking at the production pace, Tesla Motors Inc (TSLA - Get Report) could easily surpass those estimates. Yesterday, Mr. Johnson visited the company’s manufacturing facility with a group of investors, and met with management. Johnson said in a research note that he is highly optimistic about the company’s near-term performance.
Tesla to blast past estimates
Tesla Motors Inc (TSLA - Get Report) has said in the past that its deliveries were constrained by production. By the end of this year, the company plans to boost production to 600 cars/week, compared to 550 units a week at the end of Q3. Even if we assume 575 units a week through Q4, and factor in the downtime for Christmas holidays, the company is likely to produce 7,000 units. And that’s without overtime. It indicates that the company’s Q4 estimate of slightly less than 6,000 deliveries could be conservative. It rhymes well with Elon Musk’s recent statement that, so far, Q4 sales have been better than expectations.
Furthermore, Tesla Motors Inc (TSLA - Get Report) aims to ramp up its production to 800 cars/week by the end of 2014. Mr. Johnson says the electric carmaker can produce 32K vehicles even if we only assume an average of 700 units a week through 2014. That’s well above Barclays’ delivery estimate of 30K cars. These production figures are obtained on a two-shift basis with minimal overtime. Tesla Motors Inc (TSLA - Get Report) is unlikely to add a third shift anytime soon.Beyond 800 cars a week, the company will have to add more body assembly and final assembly machinery. At some point, the automaker may also consider outsourcing if it approaches the peak production. Barclays believes the current manufacturing facility can support Tesla Motors Inc (TSLA - Get Report) through the end of this decade. After that, the company would have to open a new facility, maybe in 2019. Mr. Johnson says the next facility would be outside the United States, perhaps in Asia, to meet the international demand. Battery constraints remain a cause of concern for Tesla Motors Inc (TSLA - Get Report). The company recently expanded its agreement with Panasonic Corporation OTCMKTS:PCRFY to supply 1.8 billion battery cells over the next four years. It means the deal is good for 50K-60K cars a year. Tesla Motors Inc (TSLA - Get Report) is also in talks with other battery suppliers such as Samsung Electronics Co., Ltd. (BC94) (00593)0 and LG Chem. But its rigorous qualification process may take at least two years for suppliers to prove if they can meet Tesla Motors Inc (TSLA - Get Report)’s standards.