TSLA hit all-time highs this week ($291.42) being propelled by a $400 price target by Stifel Nicolaus (although last night's comments by Elon Musk on the stock price has reigned in some exuberance today). The bigger picture for TSLA's recent rise in the past weeks is twofold. First, Tesla is looking to have a monster Q4 later this year in an effort to meet or beat their 35,000 delivery guidance for 2014. If Tesla meets their Q3 delivery guidance of 7800 deliveries then they will need to deliver at least 13,164 cars in Q4, which would be an increase of 68% quarter-over-quarter. Second, Tesla announced in their Q2 earnings report that they expect to be at a 100,000 annual production run rate by the end of 2015. This would be roughly 100% year-over-year growth from their previous 50,000 annual production run rate by end of 2014 guidance. Previously production has been limited by battery constraints, but it appears that Tesla/Panasonic has overcome the supply issue and Tesla is becoming increasingly confident in their ability to ramp production.
The other big news this week was Tesla announced yesterday they will build the Gigafactory in Nevada (see below). The Gigafactory is the key that will allow Tesla to reduce battery costs by at least 30% and allows them to be able to produce the Model 3 (Gen3) car for their target $35,000 price tag without tax incentives. As Model X nears production, Tesla will start setting their focus increasingly toward the Model 3. On one track they must design a super compelling car that will outperform the BMW 3 series, have at least 200 mile range, and yet cost only $35k. On another track Tesla must build the Gigafactory and make sure that it starts producing batteries in time for the release of Model 3 (due sometime in 2017). Since time is of the essence, Nevada made the most sense as it was the state that gave Tesla the most confidence they could meet their timelines.
While the Model S (and soon the Model X) attract the most attention from the media and observers, Tesla is investing huge amounts of time and energy into the Model 3. Key executives like JB Straubel (CTO) and Diarmuid O'Connell (VP Business Dev) are pulling together the many pieces required to make the Gigafactory a reality. This past week marked a major milestone in seeing the Model 3 vision realized.