Tesla Model Y production outpaced China Model 3 at launch helped by continued efficiencies

Tesla revealed a surprise profit in its Q1 2020 Update Letter, helped by efficiencies gained in the launch of its newest Model Y all-electric crossover.

As the company reeled in the widespread effects of the COVID-19 pandemic that took place in the same quarter as Model Y production began, Tesla was able to utilize shared production lines with the Model 3 to maximize output with little disruption to its Fremont factory. The company notes that they were able to build more Model Y vehicles within the first quarter of 2020 than the total number of Model 3 units produced in the first two quarters of  2017 when it launched.

As a result, Model Y is the first vehicle in its company history to be profitable in its first quarter of production.

Model Y production at Fremont in the first quarter of 2020 also exceeded the first-quarter production rate for the China-made Model 3 from its Giga Shanghai facility in China. “Additionally, we achieved positive gross margin for Model Y in its first production quarter,” the company’s Q1 2020 update said.

Tesla $TSLA Q1 2020 results: Beats on revenue, Model Y sets historic profit on launch https://t.co/0Z5Ym5t4eh

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Tesla began deliveries of the Model Y’s Long Range and Performance configurations in mid-March. The company revealed it had exceeded Wall Street’s delivery expectations when it released Q1 2020 figures in early April. Of the 88,400 cars Tesla successfully delivered to customers during the first three months of 2020, 76,200 were comprised of Model 3 and Model Y. It was unknown what the specific breakdown of Model 3 to Model Y vehicles was. However, judging by the fact that Tesla delivered the Model Y for just over two weeks when the figures were released, a vast majority of these vehicles would have been the Model 3.

Tesla plans to build an additional production line at its Fremont factory for the Model Y after the current lockdowns are lifted. The reopening of the Fremont plant was scheduled for May 4, but reports suggest Tesla may have to wait until June to begin producing more vehicles within the United States.

CEO Elon Musk has also stated that the location of the next US Cybertruck-focused Gigafactory will also produce Model Y crossovers for East Coast customers. The site of the Gigafactory has yet to be confirmed, but Musk has said that it will be located in the Central U.S. and closer to the East Coast.

An additional Gigafactory in the middle of the contiguous 48 states could shorten delivery wait times for customers who live on the opposite side of the country as the Fremont factory. Transporting Tesla vehicles to the Eastern seaboard can add days or weeks to a vehicle’s delivery window. The new plant will also help Tesla increase production numbers as a company. If Giga Berlin construction is finished before the new American Gigafactory, Tesla would have four production plants working together to produce high-performance electric vehicles for the world to drive.

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