Telsa will produce about 100,000 cars in 2016 and start taking pre-orders on the Model 3 after March 31st 2016

Telsa electric car customers are now driving over 107,000 Tesla vehicles in 42 countries, and have traveled nearly 2 billion miles. Tesla Autopilot is learning at the rate of over a million real-world miles per day.

For 2016, Tesla automotive is planning for even faster delivery growth than last year. They plan to be net cash flow positive and achieve non-GAAP profitability for the year, even after investing about $1.5 billion to add more production capacity, start cell production at the Gigafactory, and establish additional customer support infrastructure. Moderate GAAP profitability is expected in the fourth quarter. These investments will help prepare the way for Model 3, which is on schedule to be unveiled on March 31st and to start production and deliveries in late 2017.

Preorders for the Model 3 will begin after the March unveiling, and a fully operational Gigafactory is needed before production of the Model 3 can commence.

Consistent with our philosophy of continually improving their vehicles, Tesla recently rolled out expanded Autopilot functionality and also new features like perpendicular self-parking and their new Summon capability. With Summon, Model S and Model X can be parked or unparked even with the driver outside the vehicle, and can even open and close preprogrammed garage doors as needed. Summon is an important step on our way to autonomous driving and showcases their leadership in this area. We are now acknowledged as having the most advanced active safety and near autonomous driving capabilities of any production car in the world. No surprise that Consumer Reports magazine recently named both the base and the P85D versions of Model S to its list of top ten cars for 2015.

Throughout the rest of 2016, Automotive gross margin should continue to increase, helped by cost reductions for Model S and improving margin on Model X as their manufacturing efficiency improves for that vehicle. By year-end, Model S gross margin should begin to approach 30% and Model X gross margin should be about 25%, with continued improvement for Model X in 2017.

Q1 operating expenses should increase just slightly from Q4 as we sharpen our focus on expense management. Then as development work continues on Model 3 and as we expand to support growth, operating expenses should increase throughout 2016, so that for the full year total operating expenses should increase by about 20%.