Tesla's survival looks more certain with Blankenship confirming production rate
The big question surrounding Tesla Motors is whether the company will survive or crash and burn. Writing an Inside Tesla post on the Tesla Motors blog, on Tuesday, George Blankenship, Vice President, Worldwide Sales and Ownership Experience made the first concrete statement that the company had reached a 20,000/year Model S production. According to Elon Musk this sales rate is double what's required for the company to reach cash-flow-break-even.
Blankenship's blog post covered a long list of updates, but their production rate is the key metric we've been looking at for several months. Production of the Model S began in June 2012, and the company increased the rate between them and the end of the year. The production rate increases fell behind the original expectations, and rather than produce 5,000 Model S's in 2012 the company produced a fewer number of cars. Tesla has not disclosed the actual production for 2012 at this time, but the key milestone is to reach the full production rate. Why? This dates back to statements made by Elon Musk several times in 2012.
Tesla's 2012 Q3 report to shareholders claimed that by December sales will have increased to the point that Tesla will be cash flow positive. In October, Elon Musk made the same prediction on the Tesla Motors blog. In late August, Musk made the same sort of claim to a Dow Jones reporter. At the June shareholders meeting, Musk also claimed the company would shortly be cash flow positive. In each of those statements, Musk claimed the Model S production (and sales) had to reach only 8,000 cars/year for the company to be cash flow positive.
For Tesla Motors to reach that production milestone, to be cash flow positive, would eliminate most of the questions over Tesla's survival as a company. The company has always funded itself by raising money from investors, as well as the loans from the Department of Energy. There's only so long a company can continue doing this, because each round of fundraising digs the debt hole deeper.
What Blankenship wrote is: "We went from zero production in May to a production flow in December capable of delivering 20,000 cars this year." That production rate calculates out to the 400 cars/week goal the company had set for itself by the end of 2012. This correlates to a statement by Jerome Guillen, the company's director of Model S programs at the 2013 North American International Auto Show (NAIAS), who said at that time the production plant (in Fremont CA) is running at a "full annualized run rate of 20,000 vehicles per year".