Investor's Corner

Tesla Model 3 production can hit 65,000-70,000 in Q3 2018, says analyst

As Tesla (NASDAQ:TSLA) continues to deal with the aftermath of its privatization attempt, all eyes are once more on the Model 3 production ramp and the company’s attempt at profitability this Q3. Fortunately for Tesla, the Model 3 ramp appears to have gone strong despite the drama that ensued after Elon Musk announced his initial intentions to take the company off the public markets.

Tesla’s progress with the Model 3 ramp was the focus of Nomura Instinet analyst Romit Shah during a recent segment of Bloomberg Markets. While speaking with the segment’s host, the analyst noted that his firm is optimistic about Tesla’s Model 3 production numbers for this quarter.

“It’s changing. I mean, this quarter, we think that Tesla is gonna produce around 65,000 or 70,000 Model 3. That’s a big increase from a quarter or two ago. The whole production issue with Model 3 today is very different than what’s been going on over the last several quarters,” the analyst said.

While the Nomura analyst’s forecast for the Model 3’s production for Q3 might seem optimistic, it is pertinent to note that Tesla has been showing signs that it sustained an optimal production rate for the electric sedan at multiple points over the past two months. During the first weeks of July, for example, Tesla began earnestly pushing the Model 3 to consumers through test drive programs and initiatives like a 5-Minute Sign & Drive delivery system. More than 18,000 new Model 3 VINs were also filed in a two week period. Elon Musk highlighted the company’s progress during Tesla’s Q2 2018 earnings call, when he stated that production hit 5,000/week during “multiple weeks” in July.

The Model 3 ramp appears to have been sustained this August as well, as this month saw Bloomberg‘s Model 3 tracker breach the 6,000/week-mark for the first time since the electric car started production last year. Model 3 VIN registrations were even more impressive this month, with the company filing 16,000 new vehicles in a seven-day period. Perhaps even more encouraging was a report from Evercore ISI analysts, who noted that they “did not see anything to suggest that Model 3 cannot reach 6k units per week and 7k to 8k with very little incremental capital expenditure.”

In a way, the cancelation of its privatization attempt enables Tesla to focus on its fundamentals, which Baird analyst Ben Kallo described as “underappreciated” in a recent note. For the near future, Romit Shah of Nomura Instinet even believes that if Tesla stays focused and determined, reaching a share price of $400 should be no problem.

“They were at $350 prior to the tweet, so they were within, call it 10,15%. I think the company just needs to continue to improve production, show that demand for the vehicle is strong, which we believe is the case, and then start selling the vehicle internationally, both in Europe and China, and I think if they can do that, $400 is probably right around the corner,” the analyst said.

As of writing, Tesla shares are trading -1.32% at $315.06 per share. 

Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.

Tesla Model 3 production can hit 65,000-70,000 in Q3 2018, says analyst
View Comments
To Top