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Tesla Finally Hits Model 3 Target



Tesla model S

Tesla Inc. reached a milestone critical to Elon Musk’s goal to bring electric cars to the masses — and earn some profit in the process — by finally exceeding a long-sought production target with the Model 3.

By building more than 5,000 of the sedans in the last week of the second quarter, Tesla “just became a real car company,” the chief executive officer said in an internal email Sunday obtained by Bloomberg News.

He may turn out to be right, if Tesla can hit these manufacturing again and again. After all, producing 5,000 units of one vehicle in a week is far from unheard of in the auto industry, and the company had to pull out all the stops to get to this point, including constructing a tent and makeshift assembly line next to its factory. What Musk still needs to prove is that this level of output can endure.

“Now that Tesla has achieved the 5,000 mark, it needs to do so on a steady, routine basis and with excellent quality,” said Michelle Krebs, an analyst with car-shopping website Autotrader.

Hitting the 5,000-a-week target is a major achievement for Musk, who first revealed the Model 3 in late 2016. It’s also a relief for customers who have waited for their cars for more than two years. Their patience has been tested by a series of setbacks that forced Tesla to push back the goal from an earlier plan to reach this level of production by the end of 2017.

The 47-year-old Musk said he celebrated his birthday earlier this week at the factory, where he had been posting photographs of drive units and the paint shop to his social media accounts.

“We did it!!” Musk proclaimed in the email to employees Sunday. “We either found a way or, by will and inventiveness, created entirely new solutions that were thought impossible. Intense in tents. Transporting entire production lines across the world in massive cargo planes. Whatever. It worked.”

Optimism about the Model 3 transforming Tesla into a much bigger carmaker that sells to the mass auto market sent the company’s market capitalization past Ford Motor Co. and General Motors Co. for the first time last year. While production hiccups have led to tumultuous periods for the shares, they’re now up 10 percent this year, and the company is valued at $58.2 billion.

Musk wrote that, not only did Tesla “factory gate” more than 5,000 Model 3s, it may make 6,000 Model 3s a week next month. Including Model S and X production, the company had a “7000 vehicle week,” he wrote.

The key will be whether Tesla can keep this pace, said Dave Sullivan, manager of product analysis for AutoPacific Inc. “Reaching it is one thing,” he wrote in an email. “Consistently producing 5,000 per week with outstanding quality is another.”

Not impressed was Steven Armstrong, Ford Motor Co.’s CEO for Europe, the Middle East and Africa. “7000 cars, circa 4 hours (heart) Ford Team (heart)” Armstrong wrote on his verified Twitter account, parodying a similar tweet from Musk about Tesla’s weekly output.

The assembly plant reached the target by early Sunday, according to workers who asked not to be identified, with one saying cheers were heard at the end of the line around 5 a.m. local time. A photograph of employees signing a banner welcoming them to the “Model 3 5K Club” was deleted from Twitter and remains on Reddit.

Tesla is expected to release a formal statement on second-quarter vehicle production and delivery figures as soon as Monday. Here’s a rundown of what company observers still will have to look for in the release:

Under the Big Top

In early June, Musk told shareholders at Tesla’s annual meeting that he was feeling optimistic about Model 3 production thanks to a third general assembly line. It turns out that third line was being built outside — and under the massive tent.

How crucial a role this additional line played in achieving this goal remains an unanswered question. It’s also unclear how much longer the company will need this line and the tent, or if more outdoor assembly systems will be necessary to reach future targets.

Fits and Starts?

In the past, Tesla has said that it’s been able to boost production by idling its factories for short periods of time to address bottlenecks and upgrade equipment. Are more shutdowns in store, or does Tesla think it’s achieved a steady rate of production? What needs to happen to ultimately get to 10,000 cars a week, and when is that going to be achievable?

Concentrating on Cash

In April, Tesla said that by the third quarter, it would have the “long-sought ideal combination of high volume, good gross margin and strong operating cash flow,” and that the company wouldn’t require a capital raise this year. Musk cut 9 percent of Tesla’s workforce in June, the largest job reduction in its 15-year-history. Will the company give any update on its quest for profitability and its cash condition?

Having Reservations

Tesla opened the floodgates last week, inviting all Model 3 reservation holders in the U.S. and Canada to configure their car and put in their order, a step that costs $2,500.

The standard battery version of the car that starts at $35,000 still isn’t available in the design studio, so anxious customers can either order a higher-priced Model 3, continue to wait, or cancel their order. Will Tesla indicate what net reservations currently are?

Taxing Achievement?

Tesla doesn’t disclose vehicle sales by region, but it’s expected to hit 200,000 cumulative sales in the U.S. any day. That’s a critical threshold: Once an automaker hits that number of electric-vehicle deliveries, the $7,500 federal tax credit begins to ratchet down and phase out over subsequent quarters.

The company sent many cars to Canada in the second quarter, and Twitter is filled with posts from customers who say they are scheduled to get their Model 3 in July. If Tesla managed to put off the 200,000th delivery until after June, tens of thousands more customers will have a chance to take advantage of the full credit.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.

Crude Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend




Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach $70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

The loss of oil output after the big freeze in the U.S. should help the market firm as much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.


  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

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Crude Oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return



Crude oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Oil prices rose on Monday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up $1.38, or 2.2%, at $64.29 per barrel. West Texas Intermediate gained $1.38, or 2.33%, to trade at $60.62 per barrel.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Shale oil producers in the region could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output affected, sources said, as frozen pipes and power supply interruptions slow their recovery.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.

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Crude Oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather




Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Oil prices rose to $65.47 per barrel on Thursday as crude oil production dropped in the US due to frigid Texas weather.

The unusual weather has left millions in the dark and forced oil producers to shut down production. According to reports, at least the winter blast has claimed 24 lives.

Brent crude oil gained $2 to $65.47 on Thursday morning before pulling back to $64.62 per barrel around 11:00 am Nigerian time.

U.S. West Texas Intermediate (WTI) crude rose 2.3 percent to settle at $61.74 per barrel.

“This has just sent us to the next level,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%,” Yawger said.

However, the report that Saudi Arabia plans to increase production in the coming months weighed on crude oil as it can be seen in the chart below.

Prince Abdulaziz bin Salman, Saudi Arabian Energy Minister, warned that it was too early to declare victory against the COVID-19 virus and that oil producers must remain “extremely cautious”.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event.

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