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Tesla: Model X and S production on track, investing heavily in Model 3

Tesla’s earnings for the second quarter of 2016 are out, and the company looks to be assuring investors that things are on track, both for the existing Model S and Model X cars and the upcoming Model 3.

Tesla says it has completed the design of the Model 3 and that it has moved on to tooling, production planning, and validation. These are all routine parts of developing a new car. The company said that some Model 3 production equipment, including stamping and paint shop components, is already online. Later this year it will begin construction on Model 3 body and general assembly centers.

The company says it is consistently producing 2,000 vehicles per week, and it believes that both production and demand will support around 50,000 deliveries in the second half of 2016. That would put the company close to its previously stated goal of 80,000 vehicle deliveries for calendar 2016. Production for the first half of the year was 33,855 (29,212 delivered) vehicles, with 18,345 vehicles made (and 14,402 delivered) in the second quarter.

Tesla is also accelerating store openings, and will add a new retail location every four days through Q3 and Q4 of 2016. That’s somewhere between 35 and 40 new stores. The company mentioned adding stores in new markets like Taipei, Seoul, and Mexico City, as well as its more mature markets like in California.

Tesla also said that the locations of its new mall-based locations are improving because “many shopping malls now consider us the new standard for an anchor tenant based on the amount of foot traffic that we draw and our very high revenue per square foot.” This would suggest that a pair of tech companies — Apple and Tesla — have some of the most in-demand retail stores in the world.

Total revenue on a GAAP basis was $1.3 billion, with $1.2 billion coming from automotive, and gross margins of 21.6 percent GAAP. Automotive margin was 23.1 percent GAAP, with Model S prices rising 3 percent sequentially thanks to a better option mix and a slight price increase on the Model S refresh back in April.

The company lost $293 million or $2.09 per share after operating expenses of $513 million, though cash rose to $3.25 billion because of a $1.7 billion secondary offering. Tesla spent $295 million in capital expenditures to increase production capacity, accelerate Gigafactory construction, and expand its customer support infrastructure.

Tesla says its operating expenses will rise in Q3 and Q4 as it spends money on Model 3 supplier contracts and expands its sales and service infrastructure. In total, Tesla expects to spend $2.25 billion in CapEx in 2016.


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