After moving their 500,000 cars/year target up to 2018, what's Tesla shooting for now in 2020? As high as 1,000,000 cars a year. The acceleration of Tesla's plans comes after seeing surprising demand for the $35,000 Tesla Model 3, which is due to start production at the end of 2017.

Building the Model S at Tesla's Fremont factory

Previously, Tesla had been targeting 2020 for hitting 500,000 cars, and they're adding an extra 50% to their $1.6 billion 2016 capital expenditures budget to get there by 2018. So when Tesla CEO Elon Musk was musing on the quarterly results conference call about where Tesla would go from there, he threw out the number of 1 million cars annually by 2020.

Prodded to follow up on that, he said:

That's my best guess. If we're at a half million in 2018 and then sort of roughly 50%-ish growth from there then it's probably around a million in 2020.

I think it actually feasible, maybe not advisable, but feasible, to do it with just Fremont and the Gigafactory. We actually believe that Fremont and the Gigafactory could scale to a million vehicles. Whether that's actually wise is a separate question. As I said earlier, it's going to make sense to do localized production, at least on a continent basis, otherwise your logistics cost end up being quiet extreme. Your logistics cost start becoming a bigger and bigger percentage of total vehicle costs. That's really why manufacturers build their cars for their local market; they build cars for that market in that market. Logistics cost associated with shipping a one-and-a-half to two-ton vehicle are massively greater than, say, shipping a little consumer electronics device.

Tesla has been actively exploring starting up a second vehicle assembly factory, and is considering placing it in China. Unlike Apple, which can produce tens of millions of iPhones a quarter in China and cheaply ship them around the globe, for a company like Tesla producing multi-ton vehicles it just makes sense to pursue localized production.

While it's possible that Tesla could hit that 1 million cars annually mark on just the Model 3, Model S, and Model X alone, Musk has said that after the Model 3, Tesla will be make a smaller and even more affordable EV.