Why Tesla Is Speeding Up Delivery Estimates for the Model 3

The wait for new Tesla Inc. (TSLA) Model 3 deliveries might be getting shorter.

At least, for car shoppers opting for Tesla's highest-margin trim levels, that is.

Within the last day, estimated delivery timeframes for many users on the Tesla Motors Club forum have been moved up by about a month. Likewise, the delivery estimates for the Rear-Wheel Drive and Performance trim levels of the Model 3 have been reduced to "~1-3 months" on the now publicly accessible Model 3 configurator.

That timeframe shift comes as Tesla eclipsed 5,000 Model 3 vehicles produced in a single week for the first time at the end of the second quarter, with guidance to increase production to 6,000 Model 3s per week by late August.

The speedier delivery timelines also come as Tesla backs off its "anti selling" policy for the Model 3, after confirming that the Federal electric vehicle tax credit phase-out officially won't begin until the first day of 2019.

That means that, as Tesla pursues profitability for the first time in Q3 and Q4 of this year per Elon Musk's guidance, the company is set to maximize the number of high-margin trim level deliveries to customers in 2018, while cost of ownership is offset by a $7,500 tax credit. Conceivably, cars ordered up until November could potentially receive the full amount of the credit.

It's a clever strategy for achieving profitability before the Model 3's run rate reaches the economies of scale needed to offer the $35,000 base model profitably.

Meanwhile, Tesla's order backlog for the Model 3 sits at 420,000 as of the beginning of this month.

The Tesla Model 3 teardown that was leaked back in May indicated that all-in production costs of the Model 3 were likely to be around $28,000 at Tesla's eventual planned production rate. Given the relatively trivial added costs of the Performance trim level over the standard long-range battery all-wheel drive model, it's likely that Tesla is staring down some attractive profit margins on the Performance trim Model 3, even at current production rates.

The Model 3 Performance currently starts at $64,000, and climbs to $78,500 if fully optioned out.

For those reasons, odds are that Tesla will be pushing the Performance version of the Model 3 hard for the rest of the calendar year. The company has already refreshed its website, prominently displaying an order button for the Model 3 for the first time. And, according to Electrek, Tesla is also now paying its salesforce commissions for selling the Model 3 Performance version.

The battle between Elon Musk and short sellers is heating up - it should get very interesting in the months ahead.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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