The company expects to begin volume production by September, working toward a goal of 10,000 units annually by 2018.
Tesla claims its Model 3 program is still on schedule to begin production in the second half of the year.
The company expects to begin serial production in July and volume production by September, eventually ramping output to beyond 5,000 vehicles per week sometime in the fourth quarter.
With a lofty goal of a half million vehicles produced annually, Tesla hopes to reach the necessary pace -- 10,000 each week -- by some point in 2018.
"In early February, we began building Model 3 prototypes as part of our ongoing testing of the vehicle design and manufacturing processes," the automaker wrote in a letter to investors. "Initial crash test results have been positive, and all Model 3-related sourcing is on plan to support the start of production in July."
Installation of Model 3 manufacturing equipment is underway in Fremont, California and the Nevada Gigafactory. The company is already building its new '2170' battery cells that are used in both the Model 3 and its home energy storage products.
"Later this year, we expect to finalize locations for Gigafactories 3, 4 and possibly 5 (Gigafactory 2 is the Tesla solar plant in New York)," the letter adds.
The company will be focused on quickly clearing a backlog of nearly a half million Model 3 sedans that have already been pre-ordered with deposits.