US electric car manufacturer Tesla updated their reservation list for their forthcoming Model 3 sedan. After much cancellations and deletions, the figure has dwindled to 373,000 pre-orders with 8,000 cancellations. Company head honcho Elon Musk had earlier touted a figure of “some 400,000” deposits for the car, which is set to launch in 2017. Hoping to bring the electric car to the masses, Musk pegged the starting price at $35,000 before incentives, thus making it the company’s most affordable electric car yet. He, however, hinted that most models will be sold for an average of $42,000 once options are added.
What were the reasons behind the trimming down of reservations? In a recent SEC filing, Tesla confirmed that 8,000 potential car buyers who placed a deposit of $1,000 for the Model 3 electric cars have canceled their reservations. At the same time, the Silicon Valley-based company has dropped 4,200 orders, suspecting that these are duplicate orders placed by speculators. The reservation total of 373,000 is the net number after cancellations and deletions of some 12,000 reservations – still a huge list even after the pruning. During the day that preceded the unveiling of Model 3 on the evening of March 31, Tesla received more than 100,000 reservations for the electric car.
How Tesla plans to fund the production of Model 3
Due to the growing demand for the Model 3, Tesla is going to increase its production capacity to 500,000 electric cars a year by 2018. The company plans to raise $1.4 billion to fund the ramp up production of Model 3 (and Model S and Model X too). Tesla will be selling a total of $2 billion in stock – about $600 million of it from Musk himself. This leaves Tesla with a good buffer of investment money to fund its expansion plans. Aside from expanding factory work, the company will also expand sales and services and add more charging stations.
Tesla’s ambitious output goal raises eyebrows
To observers in the auto industry, Tesla’s annual production goal of 500,000 electric vehicles by 2018 is not only ambitious, but also laughably absurd. For a company that produced only 50,000 units (Model S and Model X combined) in 2015, how could this be even possible? Raising funds to boost production capacity will not be enough. Tesla will need to overhaul and innovate its manufacturing operations to meet demands and address more pressing challenges such as ensuring overall quality of the units and securing parts and supplies. The company is surely aware of the situation at hand, and its hiring of a production expert from another car company is a given. Peter Hochholdinger, production boss of German car maker Audi, is expected to help Tesla streamline and boost factory production.
Upcoming car model spikes demand for batteries
The anticipation over Model 3 pushes Tesla to not only rev up its production capacity, but also to find more battery suppliers for the new electric car model. Japanese company Panasonic has long supplied the company with lithium-ion cells for their Model S and Model X vehicles. Panasonic is also a partner in a gigafactory that produces the cells for the Model 3 units. It seems that one supplier will not be enough to meet the demand for batteries, so Tesla is in the talks with three South Korean cell suppliers, one of which is LG Chem, one of the three largest suppliers of lithium- ion batteries (LIBs) for electric vehicles. LG Chem happens to land a contract to supply cells to more than a dozen different models, including two Chevrolet vehicles that will go into production later this year.