What happened
Shares of Tesla (TSLA 2.70%) had revved 2.3% higher as of 11:30 a.m. ET on Friday, after Reuters reported that the electric vehicle leader is planning to extend its lead even more -- and potentially challenge BMW for total sales volume.
NASDAQ: TSLA
Key Data Points
So what
In an exclusive report this morning, Reuters cited internal Tesla documents that show the company aims to produce more than 500,000 electric vehicles in the fourth quarter -- then maintain or even increase that production pace throughout 2023.
The Q4 prediction alone is pretty astounding. Tesla will report its Q3 production numbers this weekend, and even Citigroup's analyst -- one of the more optimistic ones following the EV maker -- doesn't expect to hear that the company exceeded 370,000 for the period. Ramping up to 500,000 or more vehicles in Q4 would therefore represent at least a 35% sequential growth rate. And over the first three quarters of 2023, Tesla is aiming to produce 1.6 million vehicles, putting it on track to sell more than 2.1 million EVs over the course of next year.
As Reuters points out, a 2.1 million vehicle annual production rate would make Tesla a bigger automaker than Audi, and have it nipping at the heels of BMW, which produced 2.5 million vehicles last year.
Now what
This is an ambitious goal, to say the least. It's not, however, entirely surprising, given that CEO Elon Musk told investors last quarter that he was aiming to get Tesla up to 40,000 vehicles per week by the end of 2022. Multiply that out, and you get a figure of just shy of 2.1 million vehicles for 2023.
Rapid production growth also makes sense for Tesla. With rival car companies announcing new EV models seemingly every week, Tesla will want to grab as much market share in its growing market as it can while competition is still relatively limited. Tesla will also want to scale up production at its newer Gigafactories in Texas and Germany -- facilities that Musk has described as "gigantic money furnaces" at their present production rates -- to better exploit their economies of scale and dampen their cash burn.
The good news for investors is that Musk has a record of success with such endeavors. After burning cash for years, Tesla turned free cash flow positive in 2019, and it hasn't looked back. It generated more than $6.9 billion in cash profits over the last 12 months. And although the stock still doesn't look cheap today at more than 120 times free cash flow, the more cars Tesla makes, and the more cash it generates, the more attractive the stock is going to look.
