Tesla (TSLA) reported, that they have the capacity installed to exceed 500,000 vehicle deliveries this year.

The company wrote in its Shareholder's Letter for Q1 2020 that it is difficult to predict how quickly vehicle manufacturing and its global supply chain will return to prior levels, that is why they will again revisit their 2020 guidance in Q2 update.

For their American plants, it remains unclear how quickly Tesla and its suppliers will be able to increase production after the resumption of operations. However, the company currently has the capacity installed to exceed 500,000 vehicle deliveries this year, despite announced production interruptions.

If you follow the number of deliveries quarterly every year, you can see a clear trend: Tesla is increasing the number of deliveries with each next quarter. Usually the first quarter of the year is the weakest.

Quarter delivery numbers were up 40% year over year to 88,496 compared to the overall US auto industry down 29%, despite the Tesla-specific headwind of the elimination of the $1,875 tax credit in the quarter. Therefore, there is every reason to assume that the automaker will be able to exceed 500,000 deliveries in 2020.

But judging by the data provided by the company, its potential is much greater and by the end of 2020 should be able to produce about 700-800k vehicles. 90k Model S/X in Fremont, 400-500k Model 3/Y in Fremont and 200k Model 3/Y in Shanghai.

Source: Tesla

While near-term cash flow guidance is currently on hold, the company continuing to significantly invest in product roadmap and long-term capacity expansion plans as they have sufficient liquidity. Model Y production lines in Shanghai and Berlin remain their most important near-term projects.

The company intends to continue to produce and deliver at least 500,000 cars in 2020. This shows that the Shanghai and Model Y manufacturing processes are making measurable improvements and will not undergo the same production setbacks the company experienced ramping the Model 3.

In early Q1, Tesla began production of Model Y in Fremont, using a combination of new production lines as well as shared capacity with Model 3. Their simplified and scalable approach to manufacturing is starting to take effect. Tha automaker was able to build more Model Y vehicles in its first quarter of production than in the first two quarters of Model 3 in 2017. Model Y production also exceeded the first quarter of production of Model 3 in Shanghai, demonstrating continued improvements in program execution. All this will allow the company to produce and deliver the planned number of cars.

Gigafactory Shanghai ramp is progressing according to plan. Due to better than expected progress, Tesla believe Model 3 will achieve a production rate of ~4,000/week (or ~200k/year extrapolated run rate) by mid-2020. Thus far, the company have been able to ensure component supply in order to continue operations at the facility.

All the data provided shows that the company will be able to fulfill the tasks in accordance with its plans. Demand for the company's cars is growing very quickly, and Tesla is able to provide its customers with the best experience in buying and delivering a car, especially in the context of a virus pandemic.

Featured image: Tesla

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