Tesla Model 3 ramp-up aims to crush BMW and Mercedes

Tom Randall
Bloomberg News

One year ago this week, Elon Musk took to a stage to unveil his most important vehicle yet: the $35,000 Model 3. The electric five-seater accelerates as fast as the the best-selling luxury sport sedans in America — the BMW 3 Series and the Mercedes C Class — and costs about the same.

The value proposition was the best ever for an electric car, and the crowd ate it up.

But none of his pronouncements that night were as audacious as those to come. After taking in about 400,000 deposits at $1,000 apiece, Musk ramped up production plans. And then he ramped them up some more. Now, three months from the official start of production, the billionaire Tesla CEO seems to think he cannot only match the performance of those top luxury brands, but outsell them in the U.S., too, in just one year.

First, Musk said the company is placing orders with suppliers for “1,000 cars a week in July, 2,000 a week in August, and 4,000 a week in September.” Tesla then plans to increase production to 5,000 cars a week by the end of the year, and 10,000 a week by the end of 2018. For context, the company is currently able to make about 2,000 Model S and Model X cars a week.

For Musk to hit all of his targets, Tesla would need to build about 430,000 Model 3s by the end of next year. That’s more than all of the all-electric cars sold planet-wide last year. The rollout will begin in California and move east, focusing on U.S. reservation holders. Even if half of the Model 3 inventory shipped to other countries, U.S. sales under Musk’s targets would outpace the BMW 3 Series and the Mercedes C class combined.

Another forecast Musk reiterated is that Tesla thinks it can build 500,000 total cars next year. Model S and Model X growth would continue, but at a slowing rate.

To sell that many $35,000 sedans in the U.S. “would be absolutely unprecedented based on what we know about car markets today and how people spend their dollars,” said Salim Morsy, electric car analyst at Bloomberg New Energy Finance. “It could happen. I’m pretty sure it won’t.”

Even the most bullish analysts don’t think Tesla can sell half a million electric cars next year, and Musk has a long history of never setting a deadline that he’s likely to keep. But it’s still important to understand the lofty targets Musk is setting.

Tesla is redefining how cars are developed, built, sold, and updated.

If Tesla is able to produce 500,000 cars in 2018, there’s still the question of whether it will be able to sustain that demand, which would establish it as the leading U.S. luxury car maker.