Elon Musk’s promises are getting more realistic


MELBOURNE, Oct 20 (Reuters Breakingviews) - Elon Musk has not lost his penchant for hype. Tesla’s (TSLA.O) boss told investors earlier this month that the $855 billion carmaker can keep growing production by at least 50% a year “for quite a while”. He also thinks its Model Y SUV will be the world’s best-selling vehicle by 2023. Musk has a history of missing targets. But recent performance suggests his latest ones deserve to be taken more seriously.

Tesla cranked out a record quarter on Wednesday, earning $1.6 billion as automotive sales hit $13.8 billion, almost a fifth higher than the three months to June. That’s in part because its Shanghai factory manufactured some 133,000 vehicles, more than its plant in California, barely a year after it opened. New shop floors in Berlin and Austin, soon to become Tesla’s headquarters

, might not come online as quickly. But the success in China suggests the company can keep ramping up production capacity.

It also played a part in Tesla’s sales outmatching competitors. General Motors (GM.N), for example, handed over a third fewer vehicles in the United States than in the three months to June. Tesla globally sold 20% more.

That’s also, though, thanks to Tesla doing a better job of securing semiconductors despite the enduring global shortage. Suppliers now regard Musk’s company as a strategic customer, Morgan Stanley analysts point out, which gives it heft in negotiations and bumps it up the delivery pecking order. Tesla also makes some of its chips in-house, giving it more control over availability.

It all makes Musk’s second prediction, about being the best-selling car by 2023, a possibility. Based on U.S. quarterly sales and September’s Shanghai showing, Tesla’s 2021 annualised sales run rate is almost 1 million vehicles, more than 90% of them the Model 3 and Y. A 50% yearly growth rate would take that to almost 2.5 million units in 2023. Even allowing for S and X sales to pick up, and for the launch of the Cybertruck and the Semi truck, it’s not a stretch for Tesla’s mid-size SUV to overtake the current most popular car, the Toyota (7203.T) Corolla, which sold 1.1 million last year.

A strong balance sheet and a stubbornly racy multiple of 100 times earnings affords Tesla the ability to recharge its expansion efforts. Musk’s hyperbole deserves some discounting. But there’s now some convergence with reality.

Follow @AntonyMCurrie on Twitter


- Tesla on Oct. 20 reported third-quarter net income available to common shareholders of $1.6 billion, a record. Revenue of $13.8 billion was also a record.


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