
Tesla announces new Model 3 production plans - jseliger
http://electrek.co/2016/05/04/tesla-tsla-surge-model-3-production/
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chollida1
I hope they hit it, but they've had manufacturing issues in the past. In fact
they've never hit a target release date yet, 6 months late is the best they've
done. Now this could be that:

\- 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.

~~~
schiffern
>-They can't have any unforeseen issues op recalls crop up with the Model S or
Model X.

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.

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bluthru
Is there any new technology in the 3 that wasn't already shipped in the S or
the X? Call me crazy, but I don't think the 3 will give them the production
headaches that the S or X gave them.

~~~
wolf550e
The price of the Model 3 relies on using economies of scale to make it cheaper
to manufacture. But the saving are projected, not guaranteed. Also, they need
to make many more of them per year, which is not trivial.

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blackguardx
A factory capable of producing over 1000 cars per day is truly staggering.

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?

~~~
tfm
I was disappointed that there is no live traffic view available around the
Gigafactory [0], but filled with joy to see that its access road is named
Electric Avenue.

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/@39.5375576,-119.4397724,14.46z/data=!5m1!1e1)

~~~
mrec
You might also enjoy Letsby Avenue in Sheffield, home of the South Yorkshire
Police Operations Complex.

[https://www.google.com/maps/place/Letsby+Ave,+Sheffield,+Sou...](https://www.google.com/maps/place/Letsby+Ave,+Sheffield,+South+Yorkshire+S9,+UK/@53.395609,-1.400877,17z/data=!3m1!4b1!4m5!3m4!1s0x487977c3772a9353:0xa4b1e940b7ae6f81!8m2!3d53.395609!4d-1.3986883)

~~~
aetherson
I didn't get it. That's apparently a very British joke.

Explanation for anyone similarly baffled:

[http://forum.wordreference.com/threads/999-letsby-
avenue.147...](http://forum.wordreference.com/threads/999-letsby-
avenue.1476317/)

------
dragontamer
Its all good, but can Tesla deliver?

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.

~~~
mikeash
With such massive interest in the Model 3, raising funds shouldn't be hard.
"We need money to fulfill a massive backlog of reservations" should be an easy
sell.

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.

~~~
dragontamer
> With such massive interest in the Model 3, raising funds shouldn't be hard.
> "We need money to fulfill a massive backlog of reservations" should be an
> easy sell.

[http://ir.teslamotors.com/secfiling.cfm?filingID=1193125-16-...](http://ir.teslamotors.com/secfiling.cfm?filingID=1193125-16-577582&CIK=1318605)

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.

~~~
gozur88
>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.

~~~
dragontamer
Yeah.

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.

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Animats
Well, now we know why their production chief quit.

------
patkai
I think we know some stuff about Tesla's products, their stock, their leader,
but we know much less about their manufacturing issues. In a way it is not a
bad problem to have that they can't scale up too well, if that's their only
problem. Imagine if they figure this one out! One would think they are hiring
aggressively from GM and the like, so they will eventually have enough domain
experts who will make a difference and build a solid manufacturing potential.
Or does anyone have a good analysis about the manufacturing side? Details and
insight, I mean.

------
sorenjan
Volvo just announced that they sold 120 000 cars in this years first quarter.
Can Tesla sell more of one model than all of Volvo's models combined? Tesla
has vocal proponents in the rich tech community, but can they translate that
to the mass market?

~~~
SEJeff
Tesla's margins per-vehicle tend to be much much higher than Volvo's as well.
Volvo is the biggest car manufacturer in the world, just barely beating
Toyota. So comparing the biggest of the entrenched companies against a
fledgling startup which is just starting to hit it's stride is disingenuous at
best.

~~~
fmihaila
Volvo is nowhere near the largest car manufacturer in the world. You are
probably thinking of Volkswagen.

~~~
SEJeff
Oh wow, lysdexia fail. Good point, thanks!

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rottyguy
Curious if it's better to purchase an existing plant (and presumably upgrade),
formulate a new one, or just extend their existing plant to reach this goal.

Sounds a lot like software dev (buy, rewrite, or build on top of...)

~~~
Animats
They're in the old GM Fremont plant, later NUMMI, a joint venture with Toyota.
But that just gets them big empty buildings.

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jokoon
I wonder if Elon Musk will receive death threats one day, or if oil companies
will try to mess with anything that deal with Tesla.

For example, I wonder, is it possible for an entity to "take over" the lithium
mining industry that is outside the US?

~~~
patkai
But from the oil companies' perspective, Tesla is pretty small!

~~~
patkai
I think a typical oil company/country does not keep Tesla high on the agenda.
They probably worry about Russia, policy changes of USA, wars around them and
global economic stability. Tesla started - or contributed a lot to - a
revolution that they should worry about in the long run, but they have a
different perspective than a Tesla enthusiasts like myself.

