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Tesla reaches ‘turning point,’ promises mass production for 2013

Although it made only a few hundred cars in the third quarter, Tesla says its production facilities have reached a turning point and are now able to produce 20,000 or more cars per year.

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Elon Musk watches robots at the Tesla Motors plant (formerly NUMMI Plant)

Tesla Motors has reached a “fundamental turning point,” the company said in its quarterly earnings statement today, transitioning from a small-volume maker of boutique electric cars to a mass-production company capable of building and selling 20,000 or more electric cars per year.

That’s an optimistic statement, to say the least. If Tesla reaches its 2013 production target, it’ll be two orders of magnitude larger than the company’s third-quarter production: It made just shy of 350 Model S sedans and sold about 250 of them last quarter. It also sold 68 of its Roadster sportscars. Total automobile sales produced gross revenues of about $50 million.

While that number is small (and implies a wallet-flattening average sales price of $200,000 per car), the production was concentrated in the last couple weeks of the quarter, when Tesla says it reached a peak of 200 cars built per week. If it can maintain that rate, it will be able to produce 10,000 cars per year, which it says is the number it needs to become cash-flow positive, assuming it sells those sedans for the expected price of $57,400 and up. If you want to buy a Model S today, however, it’s much more expensive: $95,400, according to a Reuters report.

Tesla has spent much of the past year retooling its main factory in Fremont, Calif., the former NUMMI plant owned by Toyota, a slow and capital-intensive process, assisted by a $465 million loan from the U.S. Department of Energy and a $222 million follow-on offering. (The company initially went public in 2010.) It has also run into competitive trouble, with other automakers filing multiple suits claiming that its manufacturer-owned showrooms are contrary to U.S. law.

Tesla is confident it can reach a production rate of 400 cars per week next month. In other words, in 30 days it will be producing more cars in one week than it did in all of the last quarter. Financial analysis website Seeking Alpha, backed up by a Morgan Stanley report, seems to be confident of Tesla’s ability to deliver on its promises and recommends buying the stock.

That rapid ramp-up is key to the company’s success. In three more months, Tesla will deliver another quarterly report, and then we’ll learn whether its optimism is justified or just an empty promise.

Top photo: Elon Musk watches robot arms in the Tesla factory. Credit: jurvetson via photopin

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