Six months from now, we’ll know whether Tesla (NASDAQ:TSLA) is capable of high-volume production of its new mid-market Model 3. The Model 3 is Tesla’s first high-volume car. The new model has a $35,000 base price and a range of roughly 215 miles. The Model 3 line is running at the company’s only assembly plant, located in Fremont, Calif.
A tweet from Tesla CEO Elon Musk said Tesla will deliver 30 Model 3s by the end of July. The company plans to ramp production up to 20,000 Model 3s a month by December. That would allow Tesla to produce the vehicles at a rate of 240,000 a year. Tesla intends to build 500,000 cars in 2018 and a million in 2020, according to Musk.
The company has run into production problems with its luxury Model X and Model S electric cars. The main issue appears to be a shortfall of 100 kWh battery packs, which are made at its Nevada battery plant. The company produced about 80,000 Model S and Model X vehicles last year. The Model S and Model X range in price from about $70,000 to over $120,000.
Tesla unit sales were down 12 percent in the second quarter, falling to about 22,000 from about 25,000 in the previous period. Tesla’s stock took a hit after the news of the production problems emerged, closing down 2.5 percent. The stock price is still up 63 percent this year.
Musk says that he aims “to get as many electric cars on the road as possible.” At least 380,000 people have put down refundable $1,000 deposits for Model 3s. According to Tesla, 93 percent of reservation holders have no previous dealings with the company. Most buyers will have to wait until at least 2018 for their cars.
Tesla pitches the Model 3 as a smaller, more affordable version of the luxury Model S. Both cars are equipped with the same self-drive hardware. The Model S is advertised as having three kilometers of wiring, while the Model 3 has 1.5 kilometers. The Model S has two screens, while the Model 3 will have one.
The Model 3 was reportedly designed for efficient manufacturing, however few facts are known about Model 3 production. On a recent earnings call, Chief Technology Officer J.B. Straubel said, “We’ve really learned a lot of lessons, especially from the difficult Model X ramp.” The company has no traditional dealer system, so the distribution, repair and maintenance for potentially hundreds of thousands of vehicles will be a significant test for Tesla’s management.