Tesla Model S production says Tesla will fly high rather than crash

There's a big question mark hanging in the air over the fate of Tesla Motors: Did they successfully ramp up Model S production to 400 cars/week by the end of the year? Whether Tesla succeeded in this a key factor in either making or breaking the company, and in the larger scheme the whole project of vehicle electrification. A side note in a piece published by Automotive News, spotted by Green Car Reports on Wednesday, discloses a fact about Model S production that Tesla Motors has kept quiet on, namely that they have reached the full production rate of 400 Model S's per week.

The big issue is Tesla Motors corporate financial status and the reliance on investors to continue propping up the company with more investment. At the end of Q3 2012 the company nearly ran out of money, requiring Tesla management to conduct another fundraising round. There's only so long any company, even one as cool as Tesla, can remain in the mode of continually asking investors for money.

Increasing the Model S production rate means the company is selling cars to customers, and thereby receiving revenue. Last summer Elon Musk began saying that Tesla required a sales rate of 8000 Model S's per year to become cash flow positive. A milestone which Musk claimed in December the company had reached.

Model S production, and sales, makes all the difference between a company bleeding itself dry from spending on R&D expenses, and a company that's beginning to fund itself from product sales.

The Automotive News piece was mostly concerned about the significant Model S order backlog, and how quickly Tesla would be able to work through that backlog. What they said is with Tesla's "assembly plant running at its full annualized run rate of 20,000 vehicles per year" the time required to clear out the Model S order backlog will shrink from four to six months, according to Jerome Guillen, the company's director of Model S programs.

The quite from Guillen does not say when the factory began running at full steam (20,000 vehicles/year is 400/week). One of the secondary questions is whether Tesla will have met the lowered sales goal for 2012. The original goal was to sell 5,000 Model S's in 2012, but that goal was lowered in the Fall to the range of 2,500-3,500 Model S sales for 2012. That was attributed to delays in parts availability, and also caused a production delay in the 40 kilowatt-hour and 60 kilowatt-hour Model S's.

Whether Tesla Motors made that lowered production goal depends on when the company reached the full production rate. If that rate was attained before years end, then the goal was met, but if afterward the goal would not have been met. However, in the bigger picture whether or not Tesla reached the 2012 sales and production goal may not be important. Instead the overriding question is whether the company reaches and maintains a full sales and production rate.

While this bit of news is not definitive, and we won't get the definitive story until Tesla's SEC filings in a couple weeks. However, the picture is beginning to form that Tesla Motors indeed is successfully making the shift from investor-funded R&D to a self standing company funding itself from product sales. A lot of questions remain, such as will the sale rate sustain itself over the long run, or are there unforeseen warranty expenses looming in the future. The current milestone is whether the company can ramp up production and become a manufacturing company.

Sources: AutoNews.com, Green Car Reports