Tesla Stock Up 6% as Company Announces Model 3 Production Record

Tesla Model 3 (Justin Pritchard / Associated Press)
Justin Pritchard / Associated Press
Newport Beach, CA

Tesla Motors stock jumped by 6 percent Tuesday after the company announced that record weekly Model 3 production of 2,020 units means the company will not have to raise capital in 2018.

CEO Elon Musk was lambasted by Wall Street analysts over the weekend for an April Fools’ Day prank he posted on Twitter showing himself passed out, leaning up against a Model 3 sedan and holding a handwritten cardboard sign reading “bankwupt!”.

Wall Street analysts that have seen Tesla shares plunge by 33 percent over the past six months were not impressed with Musk’s stunt, and warned the company may be in default of its credit agreement and be forced to raise cash at firesale prices.

Analysts cited recent problems at the company, including: 1) disastrously poor unit production, 2) massive financial losses, 3) a credit rating downgrade, 4) a recall of about half the cars built over the last 13 years, and 5) admitting a March 23 fatal crash involved a Model X SUV in “Autopilot” self-driving mode.

But Tesla Motors now claims production improvements are generating enough cash flow that the company will not need to raise any new cash in 2018. Although acknowledging that it came up short of achieving its forecast of completing 2,500 Model 3s per week during the first quarter, hitting 2,020 for the last seven days of March sent the stock up by 6 percent.

Bloomberg News’ experimental tracking model estimates that Tesla built about 9,285 Model 3s for the first quarter, or about 774 a week.

Musk emailed factory staff at 3:02 a.m. and promised that Tesla would build at least 2,000 Model 3’s a week during the second quarter ending in June. The news leaked quickly to Wall Street.

Just hours later, Musk told analyst Amir Efrati on Twitter that he was taking the place of VP of Engineering Doug Field to supervise production and “I’m back to sleeping at factory. Car biz is hell …”.

Despite all the production hell and cash flow concerns in the first quarter, Tesla has announced plans to build a new truck and a roadster sports car, and to build a factory in China.

Tesla has admitted that trying to improve Model 3 production required moving resources off the luxury Model S and Model X assembly lines. It is unclear to the analysts just how much production S and X output will be lost and what the cash flow impacts will be.

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