How Tesla Can Proceed 50% Progress & Promote 2.7 Million Autos In 2024

I like to think about issues like an economist. I studied economics in faculty and taught economics at group faculty a few years in the past. To ensure that Tesla to extend its gross sales 50% subsequent yr (I notice that may be a long-term objective and yearly doesn’t need to be precisely 50%), it must each improve demand for its automobiles and construct them. Assuming Tesla builds and sells 1.8 million vehicles in 2023, a 50% improve can be to 2.7 million in 2024. However it’s unlikely that Tesla would promote automobiles at a fee of two.7 million for the entire yr of 2024 — it might have to ramp up all through as proven under.

So, provided that math, how might they do it? I’ll take a look at provide and demand. You’ll be able to’t promote what you may’t construct. Though there’s loads of demand for a $25,000 compact automobile that may drive itself (Degree 5 autonomy), it’s unlikely Tesla can construct that subsequent yr.

Provide

20 months in the past, under is how Troy Teslike thought Tesla might produce 2.7 million automobiles in 2024, and I feel that’s nonetheless fairly correct. I’ll ignore the Roadster and Semi, because the volumes are insignificant and the Cybertruck has clearly been delayed a yr or so, too.

Here’s what I feel Tesla’s manufacturing might be with the present buildings. There might be new buildings in 2024 and 2025. These are usually not included right here.

Nonetheless, apparently, it is already too late so as to add capability to Berlin for 2024 as a result of bushes cannot be lower between March and Sep. pic.twitter.com/dcO4FSPXmI

— Troy Teslike (@TroyTeslike) January 24, 2022

Beneath is a latest publish from Troy, and we will see Mannequin Y manufacturing at over 170,000 1 / 4 in Shanghai is way larger than the estimate of 115,125 from 20 months earlier than. Likewise, the height manufacturing of 67,548 of Mannequin Y is way larger than the 32,000 predicted. Nonetheless, that is probably as a result of the Texas and Berlin charges of manufacturing are far under his (and my) earlier expectations.

Hello everyone. My Tesla manufacturing estimate for Q3 was 422,243 on 29 Aug. That is a 12% drop vs. 479,700 in Q2.

That is associated to manufacturing unit upgrades. Elon talked about this. You’ll be able to hear right here: https://t.co/rky2nU9ozw Deliveries might be much less affected due to present stock. pic.twitter.com/G1nXI2Ykl6

— Troy Teslike (@TroyTeslike) September 6, 2023

1. Fremont can probably broaden manufacturing to about 700,000, primarily changing the Mannequin 3 to make use of Gigacastings for the entrance and rear. This may be a part of the Highland refresh or it may be on a special schedule, however it will be significant to be able to improve the manufacturing of the Mannequin 3 to satisfy the marginally elevated demand anticipated due to the refresh.
2. Shanghai is at present at nearly one million annual run fee, and I count on it to have the ability to produce 1.2 million vehicles subsequent yr with the manufacturing upgrades it has made and has deliberate for yr.
3. Berlin’s ramp has been a bit disappointing, however I count on the manufacturing unit can produce 400,000 Mannequin Ys subsequent yr.
4. Austin’s ramp of the Mannequin Y has probably been slowed by the slower-than-expected ramp of 4680 batteries, however I count on that to enhance subsequent yr and Tesla to have the ability to improve Mannequin Y manufacturing to 300,000 models and Cybertruck manufacturing to be round 100,000 models.
5. It’s attainable Tesla might make a handful of its next-generation compact vehicles now that it doesn’t need to construct a brand new manufacturing unit, however I feel it’s unlikely to supply sufficient to make a distinction in 2024.

This provides as much as the two.7 million vehicles we want subsequent yr. Now let’s take a look at the equally (or presumably extra) difficult difficulty of producing that a lot demand with solely 3 mainstream fashions.

Demand Levers

We want ample demand levers to promote a further 900,000 automobiles worldwide.

1. Full Self Driving isn’t probably to enhance to permit Degree 5 autonomy in 2024. As a fantastic driver-assistance system at Degree 2, I count on it might generate a further 100,000 models of demand, and that’s being optimistic. I feel this may generate nearly limitless demand as soon as it is ready to be authorised for Degree 5, however that may take years and never assist a lot with 2024 demand.
2. Cybertruck demand will exceed provide until it’s priced too excessive. I don’t count on it to be priced so excessive as to blunt demand, so I count on Tesla could have no downside promoting 100,000 models if it could construct them. The big backlog doesn’t imply quite a bit, since many individuals ordered and received’t purchase until the product is an efficient worth.
3. A lower-priced rear-wheel-drive Mannequin Y (as is accessible in a lot of the world) that’s obtainable within the US round $42,000, or about $35,000 after the Federal Tax Credit score, would drastically broaden gross sales of the automobile — by about 100,000 models, I estimate — which is a large improve in a single nation, particularly since it’s already one of the best promoting automobile on this planet.
4.  The refreshed Mannequin 3 might improve demand worldwide from about 500,000 models to 600,000 models, a 100,000 improve.
5. A refreshed Mannequin Y might improve demand by a couple of 100,000 or extra whether it is obtainable by subsequent summer season.
6. In 2024, the US Federal Tax Credit score turns into a point-of-sale credit score, which implies the customer will get it on the identical time they purchase the automobile. Hopefully, Tesla automobiles will be capable of declare the total credit score on the time of sale and get the total $7,500 credit score, however each of these are unknown at the moment. If consumers are capable of declare the credit score on the time of sale within the US, this could improve demand by 100,000.
7. Tesla has spoken about growing leasing in chosen markets. Within the US, you should use this to get the total $7,500 tax credit score in conditions the place the customer isn’t eligible or the automobile isn’t eligible. Tesla would like to not use its capital this fashion, however might have to relying on how issues go. It’s probably Tesla might improve gross sales by 50,000 or extra if it drastically expanded leasing with aggressive phrases. If it allowed homeowners to purchase the automobile on the finish of the lease, it might broaden gross sales much more.
8. Tesla both decides to promote new entry-level Mannequin 3 and Y with downgraded options like material seats, a much less spectacular stereo, smaller wheels, and so on. This is able to permit costs as much as $5,000 decrease, however may harm the model’s picture. The corporate may want to only promote its present fashions for a lower cost and sacrifice margins and earnings to proceed to broaden gross sales. Decreasing the value of the Mannequin 3 and Mannequin Y as much as $5,000 ought to generate no less than 200,000 further international gross sales.
9. As I mentioned on this article, promoting is required to teach shoppers in regards to the many benefits of electrical automobiles, to counter adverse myths (FUD), and to tell folks how reasonably priced Tesla automobiles are. Relying on the extent of promoting, Tesla might generate further demand for 200,000 or extra automobiles.

This provides as much as 950,000 models, however these estimates are approximate and there are after all many different components — like rates of interest, financial recessions, and the “competitors” — that may have an effect on demand each positively and negatively.

Conclusion

This isn’t meant to deal with all of the components that may have an effect on Tesla gross sales subsequent yr, however to touch upon the foremost gadgets that may have an effect on it which are particular to Tesla. Tesla has proven an unbelievable capacity to satisfy its targets within the face of many difficulties, corresponding to provide chain disruptions, monetary strain, adverse press protection, manufacturing difficulties, and extra. I don’t know if Tesla will promote 2.7 million automobiles subsequent yr, however I do know it is going to expend excessive effort and ability to get near that quantity even when it could’t obtain it.

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Disclosure: I’m a shareholder in Tesla [TSLA], BYD [BYDDY], Nio [NIO], XPeng [XPEV], Hertz [HTZ], and a number of other ARK ETFs. However I provide no funding recommendation of any type right here.