Tesla is banking on a major sales surge in the first quarter of 2023 in a bid to secure what will likely be its biggest year yet.
In the past, Tesla routinely relied on quarter-end and, more importantly, year-end sales to meet its goals.
However, the company has adopted a new strategy for 2023 to meet its production and sales targets, and it is ready to do so at any cost.
In its shareholder presentation for the fourth quarter and full year 2022, Tesla said it would accelerate its cost-cutting roadmap, sacrificing its high profit margins for an accelerated production rate and increased sales:
“In the near term, we are accelerating our cost reduction roadmap and moving towards higher production rates, while remaining focused on executing the next phase of our roadmap.”
Tesla put its money in its mouth by drastically cutting prices in early January in many markets, including China and the United States.
In the past, Tesla has used strategies such as discounts, free boosting and other incentives to drive sales, and this is one of the few instances where it uses practices at the start of a quarter to drive the sales.
Tesla technically missed its 2022 delivery targets of 50% year-over-year growth. After delivering 936,172 cars in 2021, Tesla technically would have needed 1,404,258 deliveries last year to meet its production goal. The 1,313,851 vehicles delivered in 2022 puts Tesla just under 100,000 units from its goal.
The automaker is doing everything it can to keep pace with its production targets, including driving up demand with price cuts. Its target of 1.8 million vehicles by 2023 will require 4,932 cars to be built every day, which is actually possible. With Shanghai and Fremont running at full capacity and rumors of California factory expansion, Tesla is already well on its way.
Additionally, Berlin and Texas are both increasing production, and the Cybertruck will bring some volume to Austin. However, CEO Elon Musk has confirmed that the pickup’s volume production phases won’t begin until next year.
Tesla Cybertruck will go into limited production this summer
In reality, Musk may want more. On the earnings call, he said Tesla may be able to produce over 1.8 million units:
“Ok, that works. I mean, our internal production potential is actually closer to 2 million vehicles, but we were saying 1.8 million because, I don’t know, there always seems to be a case of force happening somewhere on earth. And we don’t control whether there are earthquakes, tsunamis, wars, pandemics, etc. So if it’s a smooth year, in fact, without big supply chain disruption or massive problem, we actually have the potential to produce 2 million cars this year.”
The commitment to increase demand and sacrifice margins through price cuts is a key indicator that Tesla is ready to start 2023 on the right foot, instead of waiting for quarters to end. While demand already looked relatively healthy, price cuts have improved Tesla’s addressable market, especially with its mass-market Model 3 and Model Y vehicles.
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