2018 will be a transformative year for Tesla Motors. Elon Musk is all-in on creating a making his multi-layer assembly line and capital efficient robotic assembly.
Tesla is increasing the use of robots and creating far tighter integration between the car designers and the production of the cars.
At some point in 2018, Tesla expects to begin generating positive quarterly operating income on a sustained basis. With the planned ramp
of both Model 3 and their energy storage products, our rate of revenue growth this year is poised to significantly exceed last year's
growth rate. The launch of Model 3 is what Tesla had been building towards from day one. Tesla incorporated all the learnings from the
development and production of Roadster, Model S, and Model X to create the world's first mass-market electric vehicle that is priced on
par with its gasoline-powered equivalents – even without incentives. Now they are ramping up production significantly, and as they look
ahead in 2018, they are on the cusp of a step change in the world's transition to sustainability.
Tesla continues to target weekly Model 3 production rates of 2,500 by the end of Q1 and 5,000 by the end of Q2. It is important to note
that while these are the levels we are focused on hitting and they have plans in place to achieve them, our prior experience on the Model 3 ramp has demonstrated the difficulty of accurately forecasting specific production rates at specific points in time. What they can say with confidence is that we are taking many actions to systematically address bottlenecks and add capacity in places like the battery module line where we have experienced constraints, and these actions should result in their production rate significantly increasing during the rest of Q1 and through Q2.
In order to incorporate their learnings and be capital efficient, Tesla intends to start adding enough capacity to get to a 10,000 unit weekly rate for Model 3 once they have first hit the 5,000 per week milestone.
They expect Model S and Model X deliveries to be approximately 100,000 in total, constrained by the supply of cells with the old 18650
form factor. As our sales network continues to expand to new markets in 2018, we believe orders should continue to grow. With
demand outpacing production, we plan to optimize the options mix in order to maximize gross margin. They are focused on achieving their
target of 25% gross margin for Model 3 after our production stabilizes at 5,000 cars per week.