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Tesla Inc Model 3 Hangover Is Growing (In A Good Way)

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Tesla Inc (NASDAQ:TSLA) is currently in “production hell”. Last Friday evening saw the release of the company’s first ever mid-market sedan. Only a moderate 30 cars were delivered. However, year-end will see a few thousand Model 3 sedans coming out per month, or so Musk assures us.

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Right now though, more than half a million Tesla Model 3’s need to be built. The company’s CEO admitted this on Friday and ended over a year of speculation from analysts. The last time Tesla shared Model 3 reservation figure was in May last year. Back then, orders stood at 373,000, a figure reached within 2 months of the car’s unveiling.

We now know that Musk and his company have over 500,000 Model 3’s to get out to eager buyers. No doubt that number will only grow once more people see the car on the road. However, the number of people waiting in line are actually more than the company’s total estimated production rate for 2018. Safe to say, Tesla Inc will be up to its neck with orders for the next while.

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Model 3 Design. Source: Tesla Motors

And while we can easily go all praise and worship about the car’s arrival, we have to consider the true delays that come with it. Credit where credit is due, the Model 3 actually came out on time. This is a first for Tesla Inc. The Model S and Model X were plagued with production setbacks that led to months of delays, frustrated buyers and doubtful investors.

Third time is the charm though, as they say. Yet the most affordable of the Model 3 designs will only come out much later on. Tesla is prioritizing high add-on orders first over the most basic variants of the Model 3. That means anyone who ordered stock-standard $35,000 car will have to wait a while before getting their order.

Tesla claims that the most simple version of the Model 3 will be held back in order to “simplify” production. That means even if you were very high up on the list of 500,000+ model 3 buyers, you will still have to watch as more expensive orders gain prioritity.

Tesla Inc (NASDAQ:TSLA) is also starting things off slow, pushing out a mild 30 orders at first. Those orders are kept in the family too, so to speak, given to Tesla employees. The company wants to keep a close eye on the most inclusive car it has ever built. Quality assurance is key, and the very last thing Tesla Inc needs is a Model 3 recall.

Tesla Motors Inc (NASDAQ:TSLA) Model 3

Patience is what every Model 3 buyer needs. It is safe to assume that if you don’t work for the young automaker and ordered the most basic variant of the car, then you kind of have to wait until production speeds up. That will likely happen at the end of the year though, so hang tight.

The worst end of the stick is handed to anyone ordering the affordable Tesla now. With more than half a million people waiting to get their affordable Teslas, anyone joining the reservation list now can realistically expect their order to come along in 2019.

Tesla predicts it will push out half a million cars by the end of next year. That’s not impossible, although the company repeatedly falls short of its own predictions. Assuming it doesn’t miss its target next year, that would still leave many people waiting in line for their cars.

New buyers should bear in mind that the arrival of the Model 3 does not mean Tesla will neglect its two more established premium cars. Musk’s 2018 goal for half a million cars is very much inclusive of the Model S and Model X. Considering this, the bottom half of the Model 3 reservation list has some serious waiting ahead of them.

Those who wish to get an idea of when they will receive their order can click here.

Tesla Inc Shares

The week kicks off with Tesla Inc (NASDAQ:TSLA) Shares in the green, no doubt influenced by Model 3 excitement. The second quarter of this year saw the company race pass numerous all time highs.

Analysts had the stock pegged for $400. Momentum was brutally killed by a poor sales reports from the company though. However, shares look to be on the up-and-up again, up some 2 percent ahead of Monday’s opening bell.

Tesla Inc Model 3 reviews drive reservations

With more than 500,000 people waiting to get their hands on the car, Tesla Inc (NASDAQ:TSLA) has certainly picked the low hanging fruit. All signs in the days after release, however, suggest that the list is going to keep growing.

The first hands-on short reviews of the Tesla Model 3 are out there, and it seems that the firm’s effort has been well received. Tom Randall over at Bloomberg had a reaction characteristic of the industry as a whole.

The article leads with a subtitle stating the author has “little doubt the age of electric cars has arrived.” Reactions to the Tesla Model 3 have been jubilant so far. If the car manages to continue to impress, and that includes performing well in real reviews as well as Consumer Reports and Youtube (those were two of the biggest headline-generators for the Tesla Model S), it will likely increase the length of its waiting list.

That in turn will increase the headache for Tesla. 500,000 is production hell, but if that number sees a dramatic uptick, things could get very sticky for the firm and for those holding Tesla stock.

Watch Tesla stock for volatility

Meanwhile, investors will be focusing on Tesla’s production capacity as well as the firm’s financial position. Second quarter numbers will be released by the firm on August 2. It won’t be sales, which are a known quantity, or earnings, which are considered somewhat unimportant, that matters to investors.

Instead those with Tesla stock will focus on margins and cash burn. Wall Street is guessing that Elon Musk has lost a good part of his cash pile in the build up to the release of the Model 3. When the firm is forced to head back to the market looking for cash, there may be a whole lot of volatility involved.

An increasing number of reservations may do something to increase cash on hand, but in truth there’s nothing Tesla can do to increase its cash pile other than make a profit on each Model 3 sold.

As the list gets longer, that becomes more likely, but it still a feat Elon Musk needs to prove himself capable of.

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Mvusi Ngubane

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