Don't Panic: Tesla’s Low Q2 Deliveries Unlikely to Affect Model 3


Tesla suffered a severe setback in car deliveries for the second quarter of 2017, just as the company plans to ramp up production to meet an expected spike in demand. On Monday, Tesla announced it had delivered 22,000 Model S and Model X vehicles, 40 percent below demand until early June. In the first quarter, Tesla set a record by delivering 25,000 vehicles, which makes the second quarter results all the more troubling. It sounds like bad news for the $35,000 Model 3, which is expected to lead to much higher demand when deliveries start later this month, but there’s good reason to believe the company’s newest vehicle won’t be affected by the bad quarter.

Tesla’s bad quarter stemmed from a failure to produce enough 100 kilowatt/hour batteries. These are the largest packs the company produces, and in the Model S it translates into an impressive 335 miles per charge. It’s also the pack used in the high performance Model S P100D: capable of reaching 60mph in just 2.28 seconds, the high-end sedan is a performance beast.

This shortage is unlikely to affect the Model 3, considering the fact that the company won’t offer a Model 3 with a 100 kWh battery. The upcoming car is essentially a smaller version of the Model S, which starts at $68,000, and as part of these cost-cutting measures, Tesla has opted to use a wheelbase that can’t physically fit a 100 kWh battery:

Tesla is promising a starting range of 215 miles on the Model 3, and to cut costs further, the company has made some unique design choices to squeeze out as many miles as possible out of each battery. The car has been designed to have a drag coefficient of just 0.21, meaning the car will face less resistance as it moves through the air. The body is also made of an aluminum compound that strikes a balance between low price and reduced weight. Because of this, the entry-level Model 3 is expected to pack a battery smaller than 60kWh. The smallest size available on the Model S, by comparison, is 75 kWh.

A shortage of high capacity batteries is therefore unlikely to hit Model 3 production. Tesla has ambitious goals for Model 3 production, but all signs suggest the company is well on its way to pulling them off. It’s met the “impossible” deadline of a July production start, the first deliveries are expected at the end of this month, and Elon Musk has doubled down on his claim that Tesla could produce 20,000 Model 3s per month by the end of December.

The long term goal is to reach 10,000 Model 3 cars produced per week at some point in 2018, aided by the construction of the 5.8-million square foot Gigafactory in the Nevada desert. It sounds like a tall order, considering the company only delivered 12,000 Model S cars and just over 10,000 Model Xs in the second quarter, but the unique circumstances surrounding the setback means pre-order holders shouldn’t lose faith just yet that Tesla can keep up with demand.

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