With Tesla (TSLA -3.55%) stock up 67% year to date as of this writing, many investors are probably looking for reasons to justify the move. One factor the bulls may be weighing in their analysis of the stock is the electric car maker's improving production rates. Tesla started out the year with an ambitious target to grow production by more than 30% in 2023. While it's still early in the year, there's growing evidence that this target is achievable.
Here's a look at several of the reasons investors can have high confidence that Tesla will grow its production significantly this year.
Tesla's new factories should fuel growth
In 2020, Tesla broke ground on two new factories -- one in Austin, Texas and another in Berlin, Germany. But it takes time to build them, install tooling, and ramp up production. This is why 2023 will likely be the first year of significant enough production levels at these factories to move the needle on Tesla's business.
Tesla said in its fourth-quarter update that it had tooling and equipment installed at its Berlin and Texas factories for annualized production capacity of 250,000 at each factory. Of course, it will take time to achieve this level of production.
Fortunately, Tesla said in its Q4 update that it wrapped up last year with production rates in both Austin and Berlin of more than 3,000 units per week. This volume of production is meaningful enough to make a significant impact on the company's total 2023 production.
Demand trends justify production growth
Of course, some investors might be concerned about whether or not demand for Tesla's vehicles is sufficient enough to justify further increases in production. But Tesla said in its Q4 earnings call that recent price cuts led to a surge in demand. "Thus far in January, we've seen the strongest orders year-to-date than ever in our history," explained Tesla CEO Elon Musk. "We currently are seeing orders at almost twice the rate of production."
This surge in demand likely reinforced Tesla's confidence in its production growth plans.
Production is surging in Berlin
Finally, in more recent news from Tesla coming out this week, the company stated it recently achieved a production rate of 4,000 Model Y units per week at its factory in Germany. This puts the factory's total annualized production rate at 200,000 vehicles.
All of this points to Tesla making progress on ramping up to production rates in line with the installed capacity the automaker had at the end of 2022. Notably, this capacity was for 1.9 million vehicles, and Tesla's guidance was to build 1.8 million vehicles this year -- up from about 1.37 million vehicles built in 2022.
Less than two months into 2023, there's growing evidence that the year will be another period of rapid growth in vehicle production for the automaker.
