Tesla Vehicle Deliveries Likely to Soar in 2014

Tesla (NASDAQ: TSLA  ) has said it can achieve an annualized rate of production of 40,000 vehicles by late 2014. That rate would nearly double Tesla's guidance for 21,500 deliveries in 2013. Is this outlook realistic? A new number on Tesla's current production rate gives us a clearer picture of Tesla's potential in 2014. Spoiler alert: Tesla looks on track.

Tesla Fremont factory. Source: Tesla Motors.

600 vehicles per week
In a CNBC interview on Thursday, CEO Elon Musk said that Tesla is currently producing cars at about 600 per week. That's a quarterly rate of 7,200 vehicles. Notably, however, Tesla's comments on weekly production rates shouldn't be associated with the current quarter's deliveries. Case in point, in its third-quarter letter to shareholders, management said the company was producing 550 cars per week, which is a quarterly rate of 6,600, but Tesla only delivered 5,500 vehicles during the quarter. Even more, management only guided for "slightly under" 6,000 vehicles deliveries in Q4. So, these production rates are not a direct indicator of deliveries in the short term.

That said, Tesla's reported weekly production rates are a solid indicator of the proportional increase investors could expect in deliveries. With 600 vehicles per week being 9% higher than the rate reported in the Q3 letter to shareholders, it's reasonable to assume that Tesla can also ramp up its fiscal 2014 first-quarter deliveries by 9% over its Q4 guidance for "slightly under" 6,000 deliveries. That would put Q1 deliveries at about 6,500 vehicles. Furthermore, Tesla has continually beaten its own guidance for deliveries, so this estimate is probably a bit too conservative. Settling with an estimate of 7,000 for Q1, therefore, wouldn't be too absurd.

Looking ahead
Extrapolating 7,000 per quarter out for a full year gives us an estimated 28,000 deliveries in 2014. That's 30% higher than Tesla's guidance for 21,500 deliveries in 2013 -- not bad. But it wouldn't be fair to assume it isn't going to be able to ramp up production in the subsequent quarters in 2014. So, this full-year estimate is probably too low. In the CNBC interview, Musk clearly indicated 600 per week likely isn't the ceiling for production, but it's going to take time: "[I]t's going to take them [Tesla's supplier] a little longer to improve production beyond that."

Making a full-year estimate wouldn't be easy. It really depends on how rapidly Tesla solves its supply bottlenecks. But what is clear is that if Tesla is likely beginning the year at an annualized rate of production of 28,000 vehicles, achieving an annualized production rate of 40,000 by late 2014 doesn't sound crazy at all. In fact, it sounds completely reasonable.

Zooming out
Given the forward-looking valuation of Tesla's stock, 2014's numbers will be a small blip in the bigger picture. The company is ultimately valued for its planned affordable car that will supposedly go into production at an annualized rate in the magnitude of hundreds of thousands. So there's no reason to stress over the exact numbers Tesla can deliver in 2014. But given the bullish outlook for its future, investors should at least ensure that Tesla is, at a minimum, on track with its short-term outlook. And a quick look at Tesla's improving weekly production rate gives investors a nice little pulse check. And after running the numbers, Tesla still looks like it's on schedule to deliver surging sales in 2014.

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Read/Post Comments (13) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 13, 2013, at 10:22 AM, JouniValkonen wrote:

    It is of course foolish to comment article, where the author cannot even spell company name correctly, but here is some brief background information.

    Tesla's production rate is today around 600 cars per week (it was in Q3 550 cars per week). However Tesla anticipated that it can produce only 400 cars per week in Q4. And Panasonic of course prepared to produce enough batteries for 400 cars per week or 5200 cars for fourth quarter. Panasonic tried really hard and they managed to push little more batteries from production lines, so Tesla can produce slightly under 6000 cars in Q4. Still, Tesla is almost 2000 cars short from their actual production capacity due to component supply constraints.

    This short term battery supply problem should ease around Q2 2014 and Panasonic can catch up Tesla's production capacity. But of course it is very likely that Panasonic is still increasing production capacity according Tesla's long term guidance. And it is of course likely that Tesla can exceed their own expectations and Tesla is yet again in component supply problems.

  • Report this Comment On December 13, 2013, at 10:48 AM, ckgod wrote:

    I just want to comment battery is a commodity it will not take too long for supply to catch up with demand. There will not be any issues of investing in plant expansion long as Panasonic and others see that the demand is there. All it takes is good planning there will no supply issue by next year if they do their homework right.

  • Report this Comment On December 13, 2013, at 10:56 AM, okulawd wrote:

    What makes you think there are very many Tesla buyers still standing? This car has very limited appeal.

  • Report this Comment On December 13, 2013, at 12:09 PM, EquityBull wrote:

    I agree with poster just above. If they can make it will 40k people line up to buy it next year? Will people buy their every mans car with all the competitors that are out now and coming alongside Tesla's 2016 planned launch. A lot of risk in these assumptions. If Tesla doesn't hit everything out of the part on the most optimistic side the stock gets slaughtered

  • Report this Comment On December 13, 2013, at 5:04 PM, blando3 wrote:

    Tesla has no real competition. Name one other fully electric car on the market with range, performance, and style equal or remotely comparable to the Model S. Exactly.

  • Report this Comment On December 13, 2013, at 5:22 PM, duuude1 wrote:

    Right blando3 - actually name any other car, ICE or electric "with range, performance, and style equal or remotely comparable to the Model S". Exactly. None. Which is why Tesla is outselling Mercedes, BMW, Jag and other comparable cars in it's price range.

    Limited appeal??? That's silly - how many companies are making cars in this price range? Just because you can't afford this car does NOT mean there is no market for this.

  • Report this Comment On December 13, 2013, at 7:58 PM, marcussl55 wrote:

    Lol just saying a car that tops at 130 mph is hardly a high performance car. As far as the company goes I believe in it as a good investment.

  • Report this Comment On December 13, 2013, at 9:46 PM, JouniValkonen wrote:

    marcus, I agree. American's are somewhat silly because they do not appreciate the freedom of German autobahns without speed limits. Top speed of Tesla is only 210 km/h where as Tesla's competitors such Mercedes S550 is designed to cruise at speeds 250 km/h.

    However Tesla's range would be too limited if its design cruise speed would be 250 km/h. It is not very practical to stop every 40 minutes at supercharging station!

  • Report this Comment On December 14, 2013, at 3:07 AM, wzwizard wrote:

    yeah you stop every half hour but you're 125 km down the road.and who wants to go that fast on American roads

  • Report this Comment On December 14, 2013, at 6:54 AM, singaporenick wrote:

    I think this conversation is too America-centric.

    It's the international roll-out which is likely to decide whether their current share price is justified,and that is still uncertain as it is in such early days.

  • Report this Comment On December 14, 2013, at 1:04 PM, thegreentreefrog wrote:

    Tesla S at 4,741Lbs its the ELECTRIC PIG.

    I owned a 1962 Dodge Station wagon that was 350 Lbs lighter.This is not the Future of automobiles and will never take a place as a CLASSIC. In a race between a 1981 vega and a Tesla from NY to Philly the vega would win.The Tesla is so far ahead of its time it's already half way to the junk yard.

  • Report this Comment On December 15, 2013, at 2:33 AM, JouniValkonen wrote:

    thegreentreefrog, Mercedes S550 weights 100 kg more than Tesla Model S. So I am pretty sure that you do not want to buy S550 either.

  • Report this Comment On December 15, 2013, at 10:54 AM, duuude1 wrote:

    Most of these publications owe their allegiance to the ICE industry, and nothing to the nascent electric auto industry - nonetheless:

    http://www.motortrend.com/oftheyear/car/1301_2013_motor_tren...

    "The 2013 Motor Trend Car of the Year is one of the quickest American four-doors ever built. It drives like a sports car, eager and agile and instantly responsive. But it's also as smoothly effortless as a Rolls-Royce, can carry almost as much stuff as a Chevy Equinox, and is more efficient than a Toyota Prius. Oh, and it'll sashay up to the valet at a luxury hotel like a supermodel working a Paris catwalk. By any measure, the Tesla Model S is a truly remarkable automobile, perhaps the most accomplished all-new luxury car since the original Lexus LS 400. That's why it's our 2013 Car of the Year."

    http://www.roadandtrack.com/car-reviews/road-tests/road-test...

    "It has happened. For the first time since automobiles had fins, the world stands in awe of a car from the United States. We're proud to announce that Americans have crafted an automobile so advanced that no one else could have built it. It's electric, but it departs sufficiently from the poor-mouthed apologia and self-righteous marketing of previous electric cars to almost seem an epiphany. It's unique, it's from Silicon Valley, and it's called the Tesla Model S....according to Tesla, our top-of-the-range, $92,400 Model S should have accelerated to 60 mph in 4.4 seconds...Tesla is wrong. Our car did the deed in 4.1 seconds."

    http://www.caranddriver.com/reviews/2013-tesla-model-s-revie...

    " It pounced from an on-ramp like the jaguar on the hood of the Jaguars it resembles, hitting 100 mph with a whisper of electromotive acceleration."

    http://arstechnica.com/features/2013/10/review-tesla-model-s...

    "The Tesla's acceleration was instant, ludicrous, neck-snapping—more appropriate for a roller-coaster than a car. The camera's point of view was now skewed sideways from this morning's careful alignment, but Steve didn't reach for it because we had just gone from 70 miles per hour to north of 100, and we were still going strong."

    http://usnews.rankingsandreviews.com/cars-trucks/Tesla_Model...

    "The 2013 Tesla Model S ranks 1 out of 10 Super Luxury Cars."

    http://www.edmunds.com/tesla/model-s/2013/

    "As one of the most desirable electric cars available today, the 2013 Tesla Model S is also one of the best luxury sedans, too."

    http://www.youtube.com/watch?v=SWYDQIUKDMI

    "Ask any owner about their Model S and they'll probably have a hard time coming up with reasons to complain about it. Even people who bought early models known to come with quality defects don't seem to mind. "

    http://www.consumerreports.org/cro/magazine/2013/07/tesla-mo...

    " This electric luxury sports car, built by a small automaker based in Palo Alto, Calif., is brimming with innovation, delivers world-class performance, and is interwoven throughout with impressive attention to detail."

    http://www.kbb.com/tesla/model-s/2013-tesla-model-s/?r=10232...

    "This clean-slate approach allowed Tesla to create a sedan that handles well and accelerates like a theme park ride while providing surprisingly abundant passenger and luggage space. The Tesla Model S isn't just a better electric car – it is a radical reinterpretation of automotive fundamentals."

    http://www.autoblog.com/tesla/model+s/

    "We frankly approached our first drive with leeriness – after piloting dozens of advanced-powertrain vehicles over the past few years, we've been let down more often than not. But it took only ten minutes of jockeying though congestion, and a few foot-to-the-floor acceleration runs, to erase our doubts. The Model S truly is truly revolutionary. Unlike all if its predecessors, burdened with concessions, trade-offs and compromises in the interest of technology, Tesla's all-electric sedan chooses to excel at being an impressive and engaging sport sedan. The fun-to-drive four-door then seals the deal with its powerful, long-range and emissions-free powertrain."

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