In BriefTesla has released their production and delivery figures for the last three months of 2017. As some observers had expected, Elon Musk's company wasn't able to make Model 3 production match the overwhelming demand. What does this failure mean for Tesla?
Overpromise and Underdeliver
One of Tesla’s 2017 highlights was the launch of their highly anticipated Model 3 electric vehicle (EV). The first 30 new owners received the keys to their Model 3s during a special hand-over event on a Friday night in July 2017, but the following months didn’t see nearly as many vehicle deliveries as the company had hoped.
According to Tesla’s 2017 fourth quarter (Q4) production and deliveries report, the company delivered a total of 1,550 Model 3s during the three-month period, just over half the 2,917 figure investors had expected. An additional 860 vehicles on their way to their respective owners by the end of that quarter will be counted under Q1 2018.
Tesla CEO and founder Elon Musk hyped up his company’s Model 3 production and delivery abilities quite a lot before and during the vehicle’s launch. He famously promised that production would match the high demand for Tesla’s first mass-market, lower-cost EV, which generated roughly half a million preorders.
The original plan was for production to increase incrementally toward a goal of producing 20,000 units per month in December 2017. Despite making improvements to production speed by addressing bottlenecks, Tesla still fell well short of that milestone.
Still a Tesla-Driven Industry
What could this mean for the future of Tesla? Alain L. Kornhauser, chair of the Princeton Autonomous Vehicle Engineering (PAVE) research group and director of the Transportation Program at Princeton University, remains optimistic.
“I wouldn’t suggest that Tesla is failing. It is just that [Elon Musk’s] expectations are unrealistically high,” he told Futurism.
Kornhauser said that observers have learned to manage their expectations when it comes to Musk’s promises. Instead of believing Tesla will meet production levels by the dates asserted by Musk, they’ve come to expect that production levels will eventually reach those figures, according to Kornhauser, who noted that the quality of vehicle has played a role in keeping Tesla in the good graces of prospective Model 3 owners.
“What hasn’t been discounted is that the Model 3 is a good vehicle. That seems to be holding true,” he said. “The quality holding and the production lagging simply has increased, not decreased, demand. All good for Tesla.”
Overall, Tesla’s Q4 2017 performance was actually promising. The report presented a 27 percent improvement from Q4 2016 and a 9 percent increase from Q3 2017.
According to the Q4 statement, Tesla has a “slightly more gradual” production ramp planned for the coming months. The new goal is to achieve a weekly rate of 2,500 Model 3 units by March 2018, eventually growing to 5,000 per week by June 2018.
As long as Tesla’s quality remains uncompromised, the company won’t be failing any time soon, Kornhauser told Futurism. However, if Tesla did experience quality issues, he has a few thoughts on the companies most likely to fill their role in the industry.
“It will be some Chinese manufacturer that will fill the gap — a new one or maybe Volvo,” he said. “I’m not convinced that GM or BMW or Toyota or Hyundai will fill the gap.”
Right now, though, Musk’s penchant for overpromising won’t be enough to knock Tesla from their place atop the EV industry.