Tesla CEO Elon Musk made the announcement Monday on Twitter, claiming that the Model 3 has “passed all regulatory requirements for production two weeks ahead of schedule.”
The 400,000 customers who preordered the car are eager to see what they’ll be driving when the Model 3 — which will come in red, silver, metallic gray and black — will be delivered on June 28.
Handover party for first 30 customer Model 3’s on the 28th! Production grows exponentially, so Aug should be 100 cars and Sept above 1500.
— Elon Musk (@elonmusk) July 3, 2017
The Model 3 will costs $35,000 for the basic model, but could also come as cheap as $27,500 when factoring the $7,500 federal electric car tax credit customer could receive. And Tesla says that the five-seat car can travel 215 miles (346 kilometers) on one charge and will be sporty, with the ability to accelerate from zero to 60 miles per hour in under six seconds.
The $35,000-price point would put Tesla in a mainstream market to take on General Motors Company (NYSE:GM) and Ford Motor Company (NYSE:F).
Monday’s announcement precedes promises made by Musk suggesting Model 3 production was on track to start in July with the expectation to produce 5,000 vehicles per week at some point in 2017. And the company insisted it could double that rate to 10,000 per week in 2018.
TSLA stock — with a market capitalization of $60 billion, topping both Ford and GM — has soared in anticipation of the production ramp. This is despite the company’s poor track record of hiccup-causing delays. But the fact that production will start two weeks early is a departure from the what the market has experienced. Plus, Musk now expects Tesla’s production levels to hit 500,000 cars next year.
Tesla Is Now in Pole Position
As it stands, when considering the fact that Musk not only has the approval in hand to build the Model 3 and surging customer demand, Tesla has now raced passed its competitors such as Toyota Motor Corp (ADR) (NYSE:TM) in the qualifying stage and now sits in the pole position in the all-important race for mass consumption of electric vehicles.
While General Motors’ all-electric Chevy Bolt, priced at about $35,000, has received rave reviews, the brand advantage of the Model 3 will be tough to compete against.
The first six months of the stock market has been good for TSLA stock, which has soared 70%-plus year-to-date, crushing the rest of the market. But the second half of 2017 could be even more exciting for Tesla’s shareholders.
To meet the challenge of servicing the large Model 3 volume and limited high-speed charging stations, Tesla plans to double its global charging network to 10,000 by the end of 2017 with plans to increase them by another 50%-100% in 2018.
But that, too, will come at high cost, which TSLA skeptics insist will further hurt the company’s profitability. While Musk continues to draw criticism for the company’s high cash burn, he hasn’t completely ignored profits.
Bottom Line for TSLA Stock
Although TSLA stock is not the bargain it was when I first recommended the stock back in in January, it would be a mistake to part with this winner now. Autonomous vehicles, connected cars and cleaner/renewable energy are expected to be strong growth drivers in the years ahead.
And to gain exposure in all of these areas — good luck finding a better investment than Tesla. As such, I continue to expect TSLA stock to reach $400 by the end of the year, driven by increased enthusiasm for the Model 3 combined with rising profit margins.
As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.
