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As You're here (NASDAQ: TSLA) accelerates the production of Model 3, it is preparing to expand its deliveries beyond the United States and Canada. Earlier this month, Tesla began launching a fleet of Model 3 unit displays in Europe and invited reservation holders to come and see the vehicle in the stores. And now, Tesla even takes orders for Model 3 in China, according to Electrek.
The timing of Tesla's international deployment will help prepare Tesla to ship Model 3 in larger volumes in 2019. While Tesla seems focused on the domestic market for the second half of the fourth quarter, the company is targeting another quarter of record deliveries of Model 3, an international expansion will ensure that demand will keep pace with supply growth as the production rate of Tesla Model 3 increases.
Model 3. Image Source: Tesla.
Match demand to production
Tesla Model 3 production and shipments have increased sharply recently. In the third quarter, the Company's Model 3 shipments exceeded 56,000, compared to approximately 8,000 and 18,000 in the first and second quarters of 2018, respectively. And Tesla said it expects model 3 production and deliveries to be even higher in the fourth quarter.
While the starting price of Model 3 remains high at $ 46,000, but not yet at the price of $ 35,000 that the electric car business wants to sell eventually, Model 3 will likely be replaced by Tesla, so that Demand continues to support Model 3 production levels at this high price.
Tesla said in its third quarter earnings call that it planned to begin model 3 shipments to Europe in early 2019 and Asia Pacific (APAC) by the second quarter. By expanding internationally, the management expects to be able to extend the high levels of demand for its premium models, model 3, before the commercialization of its low-cost version with a smaller battery. "The average selling price will remain high for several quarters, as we expect a richer mix of the first wave of model 3 shipments in Europe and APAC," Tesla said in its second quarter shareholder letter.
China: a generic card market for Tesla
The expansion of Tesla in China will be particularly interesting to watch. Although the market has been promising in the past, with a turnover that has almost doubled in 2017 compared to 2016, the demand for the S and X models has been "difficult" in the market recently, announced the company in its letter to the shareholders of the third quarter. This is due to 40% import duties on both vehicles, the management said.
Tesla factory. Source of the image: author.
In its third quarter letter to shareholders, Tesla announced that it was accelerating the timing of its plan to strengthen manufacturing capacity in the marketplace to bypass important rights and increase accessibility. model 3.
"We aim to import parts of Model 3 production into China in 2019 and gradually increase the level of localization through local sourcing and manufacturing," Tesla said.
As long as Tesla can not get around a heavy 40% import duty in China, it's hard to know how the demand for Model 3 will continue in this important market.
Elon Musk, President and CEO of Tesla, is optimistic that global demand will continue to support the future growth of model 3 shipments as the company develops internationally. "In the future, we plan to produce and sell even more models 3 in the fourth quarter," said Musk at the third quarter earnings call of Tesla. "I'm expecting this trend to continue into the first quarter and we are excited to introduce Model 3 in Europe and China early next year, as the luxury sedan market medium size in these areas is even more important than in North America. "
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