Tesla Model 3 production on track for July

In its earnings letter, Tesla reports no hiccups in Model 3 production plans, while sales for Model S and Model X electric vehicles increase.

Tesla Model 3

Tesla introduced the Model 3 last year, and production plans appear to be on track for 2017.

Tim Stevens/Roadshow

Tesla's plans for production of its new, affordable Model 3 electric car, announced last year, are proceeding on track, according to the company's latest earnings letter. At the same time, it reports an increase in sales of its all-electric Model S sedan and Model X SUV.

The earnings letter notes that Tesla constructed prototypes of the Model 3 in early February to prepare for production and to conduct crash tests. The company plans limited production beginning in July, increasing to 5,000 cars per week in the fourth quarter.

Tesla announced the highly anticipated Model 3 last year, solidifying the company's plans to release a more affordable electric car than its first, the Model S. Within a day after Tesla showed off the Model 3, and in spite of deliveries not coming for a year and half, the car gained almost 200,000 preorders at $1,000 each. The Model 3 will be sold at a base price of $35,000, and have a range of 215 miles.

Tesla Gigafactory

Tesla's Gigafactory will play a major role in Model 3 production.

Tesla

During its earnings call, CEO Elon Musk said of Tesla's production plans, "Model 3 production will be simpler than the Model S or Model X. For example, the Model 3 only has one screen, where S and X have two." Musk also said Tesla's new Gigafactory, based in Nevada and responsible for building batteries and power components, will help Model 3 production, as the batteries won't have to be built in its Fremont plant.

Its earnings letter also noted 49 percent more Model S and Model X orders in the fourth quarter of 2016, compared to the fourth quarter of 2015. The addition of the Model X SUV to Tesla's lineup added to its sales numbers.

For Model 3, Tesla plans to hit 10,000 vehicles per week in 2018.

Accounting for potential problems, however, Tesla noted its guidance only focuses on the first half of the year, as "even a couple week shift in timing could have a meaningful impact on total deliveries."

Tesla still operates at a loss, according to the earnings letter, however, it reduced that amount by two thirds, to $121 million, from the fourth quarter of 2015 to the fourth quarter of 2016.

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