Tesla announces new Model 3 production plans
electrek.co
electrek.co
- they are just really optimistic on their release dates,
- they announce early to try and cut off competitors sales
- they just aren't that good at manufacturing ramp up.
Just last night they were forced to join a recall due to faulty air bags from a supplier, Takata Corp. They've got alot of things that need to happen for this to occur.
-They can't have any unforeseen issues op recalls crop up with the Model S or Model X.
- They battery factory has to come online without a hitch.
- The price of lithium and other rare earth minerals has to remain steady, I've heard that its very hard to hedge these prices due to a lack of counterparties willing to take on the risk
- their rumored/china manufacturing plant has to come online smoothly
- and off course they need to be able to ramp up manufacturing on a car they've never produced
One side effect of this is that this means that US tax credits for EV cars would start to taper off at the beginning of 2018 and fully end at mid 2019 for all electric vehicles.
I can't pin down any analysts on a consensus as to whether or not they'll hit their manufacturing target for either the first model 3 delivered or the 2018 500,000 cars manufactured.
The only consensus I could get is that if they need more cash to make it happen they'll have no problem tapping the credit or equity markets, regardless of the conditions at the time. The markets seem to really want this to happen, which is awesome.
Minor note on the story, Its true that TSLA moved up slightly in the after hours but its actually now well down from yesterday's close.
This is a service issue, not production. Tesla has weathered recalls before. Of course an expensive major recall could delay their capex investment, but it's in no way true that any unforeseen issues will cause a delay.
>- They battery factory has to come online without a hitch.
The factory is already online. It will have to ramp production, and accordingly it's a major focus for the company.
>- The price of lithium and other rare earth minerals has to remain steady, I've heard that its very hard to hedge these prices due to a lack of counterparties willing to take on the risk
Lithium is not a rare earth metal, nor are any rare earth metals used in Tesla batteries. The price of lithium makes up a tiny percentage of the overall battery cost -- nickel and cobalt are both more significant cost drivers.
>- their rumored/china manufacturing plant has to come online smoothly
Not needed. Fremont can deliver 500,000 cars/year on its own.
>- and off course they need to be able to ramp up manufacturing on a car they've never produced
Which is why this is Tesla's other main focus.
The same can be said of any new product. Everything ever produced was "never produced"... until it was.
So... 2/5.
When I was living in the Midwest, the traffic lights were synced to the local GM plant's shift schedule because the volume of employees driving in made it look like traffic to a theme park. Does Tesla's factory do something similar?
The thing that impressed me most was that the shell would be assembled for painting, then the doors would go off on their merry way and rejoin the same car hours later right before the final checks so that the paint would exactly match.
Lateish edit
I forgot to add, all of those crazy robots in the Tesla videos that assemble the vehicles without human intervention? Other manufacturers have relied on those for at least a decade.. It was generally considered proprietary which is why it seemed so novel when Tesla released their promo videos.
Production line design and tuning is all about cycle time. The line runs at the speed of the slowest station. Any operation that takes too long has to be broken up into successive operations, even if one station could do it. You can fan out the line to multiple stations if you absolutely have to have a long cycle, but that adds cost, takes up floor space, and is really tough to retrofit. It's not unusual, though, to redesign the slowest station if that will speed up the whole line.
Take a look at that Mercedes assembly line. Note all the custom fixtures required, many with sensor and actuators attached. All those have to be designed, built, tested, and run through enough cycles that they behave reliably. One failure stops the whole line.
Previous reports seem to indicate that the workers may be at the factory for 20 hours a day, so perhaps they're all sleeping next to Elon in burlap sacks to cut down on congestion?
[0] https://www.google.com/maps/@39.5375576,-119.4397724,14.46z/...
https://www.google.com/maps/place/Letsby+Ave,+Sheffield,+Sou...
Explanation for anyone similarly baffled:
http://forum.wordreference.com/threads/999-letsby-avenue.147...
They were late with the Model X, and they're currently losing $280 million per quarter or so with only 1.4 Billion in cash remaining (a lot of it probably tied up in other short-term liabilities). And that was with 500k cars by 2020 as the plan. (Tesla has a few lines of credit that they can tap between now and then... but you can tell that the money is going to be tight)
If Tesla is accelerating plans, we can expect them to burn through even more money as they ramp up production even harder. It will be worth it of course, but this isn't an easy path for them to take. I'd expect that Tesla will need another stock offering to raise enough funds.
Their ability to deliver, irrespective of cash, is definitely a big question. Hopefully they have learned the right lessons from the problems with the X and won't repeat it. I think this is likely, but it remains to be seen.
http://ir.teslamotors.com/secfiling.cfm?filingID=1193125-16-...
Tesla has $1.4 Billion in "Accounts Payable and Accrued Liabilities" and $1.4 Billion in Cash (or cash-equivalents), and are losing $280 Million PER QUARTER, with 2017 as the soonest launch date for the Model 3.
Note that Tesla's R&D efforts are only $182 Million, so Tesla is losing $100 Million per quarter even if they cut all R&D efforts off entirely!
Now I know that a lot of Tesla's accounting is weird: I think the Model 3 ramp-up effort might not actually count as R&D (although this is from memory). But... this isn't exactly the healthiest balance sheet that I've seen. There's a good chance that Tesla is simply going to run out of money entirely before 2017 unless it can secure even more long-term loans or raise capital somehow.
And if you're a company that is threatening to die, then banks will not want to lend more money. No matter the wild promises of future revenue you may bring to the table. Elon Musk managed to get a $300+ million "loan" from the preorder program (its sort of like a loan, without any interest. Good job Elon on selling that preorder stuff!). But Musk will have to repeat this feat every quarter until his company starts making money.
Or, he needs to fix this company to start losing less than $280 Million per quarter. That's... a serious, serious problem.
The fix is to sell lots and lots of Model 3s.
In terms of raising money... 400,000 people put down a grand to reserve a Model 3. That alone covers the gap for 4-5 months and costs nothing.
Now Tesla needs to raise that amount of money repeatedly until they stop burning money (which probably won't happen until the Model 3 is released). I tend to think that this $400M or so that they got is a one-time thing. Its not like they can suddenly announce a Model 2 and get another $400 Million from the public.
They seem to be learning from that and have emphasized the relatively simplistic production of the Model 3. That's going to be the key with this vehicle. It has to be easy to produce so costs can be kept down and error rate is low. They can afford to take things slower with the margin on the Model X, not so much on the Model 3.
I don't think these small advantages are worth the massive cost and complexity, but it is a bit more than just being cool.
The title is very misleading. The 500,000 figure includes Model S, Model X, and Model 3.
Sounds a lot like software dev (buy, rewrite, or build on top of...)
For example, I wonder, is it possible for an entity to "take over" the lithium mining industry that is outside the US?