Musk says Tesla hits Model 3 milestone of 5,000 units in week

SAN FRANCISCO -- Tesla Inc. reached a milestone critical to Elon Musk’s goal to bring electric cars to the masses -- and earn some profit in the process -- by finally exceeding a long-sought production target with the Model 3.

By building more than 5,000 of the sedans in the last week of the second quarter, Tesla “just became a real car company,” the CEO said in an internal email Sunday obtained by Bloomberg News.

The 47-year-old Musk said he celebrated his birthday earlier this week at the factory, where he had been posting photographs of drive units and the paint shop to his social media accounts. 

“We did it!!” Musk proclaimed in the email to employees Sunday. “We either found a way or, by will and inventiveness, created entirely new solutions that were thought impossible. Intense in tents. Transporting entire production lines across the world in massive cargo planes. Whatever. It worked.”

But it was unclear when exactly Tesla hit the milestone. Two workers at the plant told Reuters the 5000th unit of the week actually rolled off the assembly line on Sunday morning, several hours after Musk's midnight goal.

The 5,000th car finished final quality checks at the Fremont, Calif., factory and was ready to go around 8 a.m. Eastern time (5 a.m. Pacific), one person said. It was not clear if Tesla could maintain that level of production for a longer period of time.

Tesla had a goal of producing 5,000 Model 3s per week before the close of the second quarter on Saturday to demonstrate it could mass produce the battery-powered sedan.

Money-losing Tesla has been burning through cash to produce the Model 3, and delays have also potentially compromised Tesla's first-to-market position for a midprice long-range battery electric car as a host of competitors prepare to launch rival vehicles.

Production of the Model 3 has been plagued by a number of issues, including problems with an overreliance on automation on its assembly lines, battery issues and other bottlenecks.

As the end of the quarter neared, Musk spurred on workers, built a new assembly line in a huge tent outside the main factory, and fanned expectations that Tesla could hit its target, including tweeting pictures of rows of auto parts and robots over the final days of the quarter.

"It was pretty hectic," said one worker who described the atmosphere as "all hands on deck."

Another worker speaking after the 5,000th car was made described the factory as a "mass celebration."

Tesla is likely to announce production and delivery numbers for the quarter later this week, and investors will watch to see whether the company can keep up its end-of-quarter production speed.

'Burst builds'

Musk wrote that not only did Tesla “factory gate” more than 5,000 Model 3s, it may make 6,000 Model 3s a week next month. Including Model S and X production, the company had a “7000 vehicle week,” he wrote.

The key will be whether Tesla can keep this pace, said Dave Sullivan, manager of product analysis for AutoPacific Inc. “Reaching it is one thing,” he wrote in an email. “Consistently producing 5,000 per week with outstanding quality is another.”

Not impressed was Steven Armstrong, Ford Motor Co.’s CEO for Europe, the Middle East and Africa. “7000 cars, circa 4 hours (heart) Ford Team (heart),” Armstrong wrote on his verified Twitter account, parodying a similar tweet from Musk about Tesla’s weekly output.

Tesla regularly engages in so-called "burst builds," temporary periods of fast-as-possible production, which it uses to estimate how many cars it is capable of building over longer periods of time.

“Now that Tesla has achieved the 5,000 mark, it needs to do so on a steady, routine basis and with excellent quality,” said Michelle Krebs, an analyst with car-shopping website Autotrader.

Analyst Brian Johnson of Barclays warned investors in March to be wary of brief "burst rates" of Model 3 production that were not sustainable.

Tesla said in May that its net Model 3 reservations -- accounting for new orders and cancellations -- exceeded 450,000 at the end of the first quarter.

Despite touting the Model 3 as a $35,000 vehicle, Tesla has yet to begin building that basic version and instead is currently building a higher-priced version. It is not clear how many of the orders are for the higher-priced versions.

Tesla in January pushed back its target date for building 5,000 vehicles per week to the end of the second quarter, the latest in several delays that have concerned some investors.

Steady progress has enthused others, however, and Tesla's market value is close to that of General Motors. The company has said it will not need to raise cash this year.

Turbulent month

June was turbulent for Tesla. It laid off 9 percent of its workforce, endured at least two fires at its Fremont plant and accused a former employee of engaging in sabotage for speaking to the media. The ex-worker claims he is a whistleblower.

In early June, Musk said it was "quite likely" that Tesla could deliver 5,000 Model 3s per week by the end of the quarter. At the time, Tesla was producing 3,500 of the vehicles per week, he said.

As the end of June approached, workers told Reuters that the company was building fewer than its 5,000-per-week goal.

Bloomberg and Reuters contributed to this report.