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Tesla Needs to Massively Expand as It Enters a Critical Year for the Model 3

The company plans to soon double the number of its vehicles on the road.

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BY Kevin J. Ryan - 13 Jul 2017

PHOTO CREDIT: Getty Images

Tesla is making the final preparations for a huge 12-month stretch.

Elon Musk's company is on the verge of rolling out its new Model 3, the $35,000 electric vehicle that it's been hyping up for years. The company says it has already received 400,000 preorders for the car that it projects to begin shipping at the end of July.

Previously the company has said it wants to deliver all those Model 3s within a 12-month timeframe. There are currently just 250,000 Tesla vehicles on the road worldwide--which means that the company will be doubling its total number of driven vehicles at some point in the next year.

As such, the company is now hugely expanding its the service network that supports those vehicles. According to CNBC, Tesla is opening 100 new service centers, a big increase from its 150 current facilities. It's also sending 350 new on-demand service vans onto the road and hiring 1,400 additional service workers.

Tesla currently manufactures a little over 20,000 vehicles per quarter. Late last year, Tesla purchased German manufacturer Grohmann Engineering to help improve its car-making capabilities. As its huge Nevada Gigafactory continues to develop, the company says it is increasing the rate at which it can manufacture the lithium-ion batteries used in its vehicles.

Even so, Tesla revealed earlier this month that its vehicle production decreased from 25,000 vehicles in the first quarter of 2017 to 22,000 in the second, a problem it blamed on production issues with producing its car batteries. The company said it has since corrected the issue and is back on track, though that didn't stop Tesla's stock from dropping by 16 percent last week.

Musk's firm has said it wants to manufacture 500,000 total vehicles in 2018, which would amount to an ambitious five-fold increase from its current rate. Lately, the company has managed to hit several ambitious targets. In December, it followed through--albeit by a matter of hours--on its promise of rolling out its Autopilot update before the end of the calendar year. It then announced in January it had achieved its goal, originally set for early 2017, of mass producing batteries at the Gigafactory. And since last year, Tesla has said it wanted to begin manufacturing the Model 3 in mid-2017; the first Model 3 ceremoniously rolled off the assembly line last week.

It's a critical time for Tesla, and the company would be well served to keep hitting those goals. Much has been said about Model 3's potential to expand the company beyond the luxury market and plant it firmly into the mainstream, but that's far from a foregone conclusion.

Traditional car makers from Ford to BMW to Volvo, which announced last week that it would cease production of all-gas vehicles by 2019, are breathing down Tesla's neck, so while it might have a head start, it likely won't be the only big player in the affordable electric car market for long. What it does in the next year could go a long way to determining whether the company will live up to the $50-billion market cap afforded by its high stock price--or whether, as some experts have predicted, we're in a Tesla bubble.

For now, Tesla needs to bulk up its service network and its production. Musk tweeted last week that the company should be able to produce 20,000 vehicles in December. That will be one important step for the company--though at this point, all the steps are critical.