Tesla Motors Inc (TSLA) Is Ramping Up Production

The BMW comparison

The naysayers have difficulty accepting that Tesla is currently valued at one quarter of Bayerische Motoren Werke AG (FRA:BMW)‘s $65 billion market cap. If we only consider the profits and the numbers of cars delivered, it is a difficult notion to argue. BMW is more than likely going to sell more than 1.5 million vehicles this year, while Tesla should sell slightly more than 22,000 Model S units.

However, Tesla offers only one model, the Model S. The only comparable model from BMW is the four-door sedan 6-Series. Both cars have similar pricing, averaging in the mid $80,000s, and they both target the same market.

BMW sold 23,193 units of its 6-Series in 2012, while Tesla is poised to sell almost as much of its Model S during its first full year of production. There is nothing leading us to believe that the same thing could not happen with the future models Tesla proposes.

BMW is not sitting on its hands. Next year, it’s releasing the i3 and i8, which could provide interesting upside for the company. After all, it’s still a leader in the mid-luxury and luxury car market, and it could profit from a shifting industry.

Conclusion

The rate of VIN assignments is very encouraging for shareholders. It indicates to us that Tesla is on the right track to meet its sales goals. Ultimately, by ramping up production and securing better prices from suppliers, Tesla could even achieve a  25% gross margin. I remain bullish on the stock, and I recommend investors keep a close eye on the gross margin of the Model S. Tesla needs to get to 19% during the current quarter in order to stay on track for 25% in Q4.

The article A Guide to Determining Tesla’s Production Numbers originally appeared on Fool.com.

Frédéric Lambert owns shares of Tesla Motors . The Motley Fool recommends Tesla Motors . The Motley Fool owns shares of Tesla Motors . 

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