People look at a Tesla Model Y electric vehicle in a Miami Design District showroom.
Joe Raedle/Getty Images
Christmas arrived a little late for Tesla bulls. They have been eagerly awaiting the start-up of new manufacturing capacity. Now the start-up is imminent.
Saturday, Wedbush analyst Dan Ives wrote that Tesla’s (ticker: TSLA) new facility in Austin, Texas, known as Gigafactory Texas, will begin production in about a week. That means more Model Y crossover vehicles—and, just as important, that the Cybertruck will be arriving on U.S. roads shortly.
“Based on our analysis of Giga Austin it appears paperwork is now clearing the way for Model Y production starting over the next 7 to 10 days,” wrote Ives. “Launching the Austin production in early January is very important to Tesla expanding both domestic and global production of Model Y’s which are set to have a massive year in 2022.”
Tesla delivered more than 936,000 vehicles in 2021. The vast majority—more than 911,000—were Model S sedans and Model Y crossover vehicles. Tesla doesn’t provide a more detailed breakdown. The Model S and Y are Tesla’s lower-priced, higher-volume Models. The Model Y is the hottest seller right now and CEO Elon Musk has high hopes for the vehicle.
“We think the Model Y will be the best-selling vehicle of any kind globally,” said Elon Musk, referring to 2023, at the company’s annual meeting—held in Austin back in October. “We need Austin to get online and Berlin to get online and reach volume production, and then I think that’s going to happen.”
Wall Street expects Tesla to deliver 1.4 million units in 2022, up 55% compared with 2021. Tesla has given volume guidance, but it is really more like a goal. The company says it wants to grow volume at 50% a year for the foreseeable future. Volumes rose 87% in 2021 compared with 2020. The pace at which production ramps up at Austin will go a long way to determining if Tesla can hit its 50% growth goal this year.
Tesla’s other new plant, in Berlin, Germany, is also about to start up production. That plant will produce Model Y crossover vehicles to start, like Texas.
It should be a wild year for Tesla, which is essentially doubling production capacity, going from two plants to four. Tesla also makes cars in Fremont, Calif., and Shanghai, China.
The two new plants means a lot will change. Profit margins will change as European volumes are delivered from Europe instead of from China. In addition to the Model Y, the Austin plant will make the light-duty pickup truck called Cybertruck. That will compete with Ford Motor
‘s (F) all-electric F-150 Lightning in an important vehicle segment in the U.S., where pickup trucks account for 20% of all new vehicle sales. And, of course, investors will watch closely to see if Tesla can sell all its cars as it produces more and as other auto makers, such as Ford with its electric truck, bring more EV models to the market.
Tesla stock rose 50% in 2021 as it delivered more cars than expected. It will probably take another delivery “beat,” better than 1.4 million, to keep the stock working higher in 2022.
Tesla stock opened the year up 13% Monday, Jan. 3, after better-than-expected delivery numbers were released on Jan. 2. Then shares sold off amid a broader tech rout. Investors were spooked by the Federal Reserve’s December meeting minutes, which indicated it was committed to raising interest rates. Higher interest rates especially hurt highly valued growth stocks, as the future profits investors are betting on will be worth less.
Tesla stock is now down 2.8% year to date. The S&P 500, Dow Jones Industrial Average, and Nasdaq Composite are down 1.9%, 0.3%, and 4.5%, respectively.
Write to Al Root at [email protected]
