Recently, Elon Musk was asked questions about the expected growing value of Tesla cars as a result of full driving capability. He however gave them quite an exciting response by indicating the possibility of producing over 500,000 cars in the next 12 months.
One thing in particular worthy of mentioning is that, those cars will be hardware readily equipped with autonomous driving. In a recent statement released by the company, the updated software will be ready to bring out the strength of those cars. However, the cost of those new cars is expected to increase due to the availability of the software only for cars with FSD option.
Producing 500,000 units of cars might seem impossible to some, but not to Tesla in 12 months
When you take a close look at the rate of production, the roll out for Tesla’ 12 months was around 29,700 towards the end of March. This included the sale of 206,000 units of Model 3 by Tesla. Similarly, sales around this period were estimated to 280,000.
For Tesla to reach the 500,000 landmark, the company needs to manufacture and sell minimum of 125,000 units of cars at every quarter. For Q4, the company achieved record sale of 86,555 in 2018. For the Q1 2019, the rate of production was 77,000, which included record sales of 29,950 for Model 3.
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It requires a 67% annual growth to achieve an increase from 300,000 to 500,000. This means the production and sales of Model 3 need to be twice the normal production rate to 400,000 yearly.
If Tesla can successfully manufacture and sell 500,000 every year, this would automatically increase the income due to the availability of autonomous driving capability. In simple term, the profit is expected to reach high levels. You can get the FSD option for $5,000 and the price is expected to get higher in the nearest future.
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When you calculate the profit margin for the 100,000 cars produced coupled with the 5,000 dollars robot taxi option would generate a whopping income of 500 million dollars. When it comes to business perspective, Tesla shouldn’t have much of a problem if the production growth and automation is achieved. Guess all eyes are on the Model Y by tesla, which its launch will bring yet another growth.
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