Can Tesla Now Build 500 Model 3 Sedans Per Day?

Leaked emails are becoming somewhat routine when it comes to Tesla Inc TSLA.

The automaker recently had a leaked email that came from CEO Elon Musk says the company is looking for a "burst-build target rate" of 6,000 units per week by the end of June. The current target though is to be building 5,000 Model 3 sedans per week by the end of Q2.

So why the 1,000 unit difference? If you aim for 5,000, but even one supplier comes up short, the whole line stalls. This way, targeting 6,000 units allows some room for error while still being able to -- from a supply standpoint -- manufacture 5,000 Model 3s per week.

Anyway, that leaked email from mid-April suggested that changes to the assembly line should allow Tesla to produce 3,000 to 4,000 Model 3s per week "next month."

Here we are in May, and that goal may be attainable. The latest leaked email says Tesla could produce 5000 Model 3 vehicle per day this week. On a weekly basis, that's about 3,500 units. If that's the case, Tesla's staying relatively on target with its previous outlook, a good sign for investors and Tesla enthusiasts (and those still waiting for their new Model 3!).

Tesla is seemingly answering the question of whether it can produce 5,000 Model 3s per week. Assuming the automaker can get to that level and improve upon it moving forward, the question then shifts to profitability. After bumping up production hours and hiring more humans for the task, can Tesla enhance the profitability of the Model 3? The short answer should be, "yes."

Let's use easy numbers for example and say it takes 5,000 people to assemble 3,500 Model 3s per week. By getting that output number to 5,000 per week while staying constant with 5,000 employees would improve profitability and margins. 

On paper, it's simple. In the real world, not so much. It will be interesting to see what the automaker turns in next quarter. Tesla's bottom line won't turn on a dime, but if the company can "bottom" in the current quarter and improve in Q3 and Q4, it could give bulls loads of confidence.

With Tesla being the most heavily shorted stock in the market, this could fuel a short squeeze. 

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

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