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Tesla's Model 3 volume production target pushed back again (reuters.com)
141 points by joering2 9 months ago | hide | past | web | favorite | 142 comments

Most auto final assembly lines build about a car a minute. Running two shifts, 5,000 cars a week is about normal. If the line is running much below a car a minute, or is stopping much, something is very wrong.

It's not a fundamental problem. It's Musk trying to put an assembly line into service too fast. An assembly line is a custom-built machine about a thousand feet long. They take time to debug, and people who've done it before. Usually, most of the debugging takes place off-line in supplier factories before the final line is assembled in place. Tesla skipped that step to save time.

Doing it that way is insanely expensive. The operating costs are roughly constant regardless of the number of cars that come out, so debugging while producing means a huge cost per car.

Likely it was his only option. Delaying shipping the car by 6 or 12 months (arbitrarily-chosen numbers) was simply a non-starter for, I'm sure, cashflow reasons.

Even if this means it takes 2-3x as long to get up to full production rate, from an investor standpoint, this was likely a necessary evil.

Tesla only shipped 260 Model 3’s in Q3. Now they’re approaching 1000 cars a week.


Cars produced in the last seven days of the quarter is a somewhat gamable metric. They may or may not be sustaining production at that rate.

The good numbers come from DMV registrations. There are industry sources which collect that data weekly.[1]

[1] https://hedgescompany.com/automotive-market-research-statist...

While you are correct this is a very gamable metric, its nonetheless a good sign of considering the number of cars they were previously producing.

> It's Musk trying to put an assembly line into service too fast.

He doesn't have much choice. The company is over leveraged 7 to 1. With Feds slowly increasing the interest rates, Tesla's interest obligations will start to balloon as well. So they need to start selling more and more cars. That requires a big assembly line.

It's only insanely expensive relative to the financing cost structure of traditional companies. If you view Tesla as a high growth tech startup, with an insanely cheap way to raise capital, you can say they are spending very little money to generate such high revenue growth rates, especially compared to say Uber.

Insanely cheap? They had to borrow money (as opposed to selling shares) at 5.3% interest last year. Those bonds currently trade at about 5.9% interest (https://www.bondsupermart.com/main/bond-info/bond-factsheet/...)

If they need more money, they would either need a very good story, or pay more interest (“Production pushed back again” is not “a very good story”)

Tesla is a stock that may bring big profits, but that is not without risk.

This article caused me to become very bearish on Tesla.


Not on EVs in general, but just on their ability to actually outpace delivering the market (without killing anyone) before the old guard caught on and gets there first. Not a novel thought, but the factory analysis really put the nail in the coffin for me.

From that article, I got a very different impression (despite its clearly negative tone). The quote that really stood out to me was

"How long does it take to build such a factory? From that other car company, you may have heard that car factories could be brought from no plans to mass production in two years, no time at all, or whatever is less. I ask Mr. Demeunyck how long the Luqiao plant took from start to finish, and he proudly tells me that it “took only five years. They do things fast in China”... "In Europe, or in other places with tight permitting, it would take a few years longer,” Demeunyck says. If anyone tells you he has picked no location, and secured no permits, but wants to have a new car plant up and running in two years, call an ambulance."

Apparently, what they are really arguing is not that Tesla is bad at production, but that Tesla is trying to do something nearly impossible. In this light, the problems Tesla faces are not because they lack the skills or expertise to deliver, but problems that any other car company would face if they were to do things on the schedule Tesla is trying to achieve.

Thus, Tesla is really just taking a huge gamble -- they have a chance to pull off something very impressive, even if they fall 6 months or a year behind schedule. And if they fail, they failed because they took on a challenge that was simply too hard for any company to achieve. To me, it really resembles the gamble that SpaceX took, which paid off very well in the long run. So while I think there's a real chance that Tesla will fail like all of their detractors believe, I think there is also a real chance that they will be wildly successful.

Right. And looking at SpaceX also shows the futility of looking at initial production rate as indicative of long-term production rate. SpaceX got 2 launches off in 2010, zero in 2011. ULA and Ariane and Russia were laughing at them and mocking the idea of reuse and recovery.

SpaceX launched 18 last year, all successfully, more than any other rocket. All recovery attempts succeeded, and several rockets were reflown. Their competitors have had to cut their workforce and are now feverishly trying to catch up with new designs (most of which are inadequate for even the current Falcon 9, let alone future rockets). The line between laughing stock and huge success is pretty small if you're in the exponential ramp-up phase.

Sorry but what does building five rockets in a quarter have to do with any of this? ("Elon Musk" is not a valid answer.) The auto factory mentioned in the article is set up do to 400,000 cars a year. They are completely different problems. If you've never seen it in person before, the level of automation required to mass produce automobiles is really something. Have a look at the two factory floors. There are nothing alike:

http://www.spacex.com/news/2013/09/24/production-spacex http://www.popularmechanics.com/cars/hybrid-electric/g877/ta...

I forgive you. You missed the point, which is that the line between "laughing stock" and "industry dominance" is pretty fine when you're still in the exponential ramp-up period of something, whatever that "something" is.

The production rate is clearly changing from week to week, month to month (increasing at a decent clip on a percentage basis). As long as that is happening, they're still in the ramp-up phase.

That SpaceX page is over 4 years old. That was back when "production" meant a few rockets per year. (Not that the volume is anywhere comparable even today.)

What I gathered from this conversation was to bet on the longer term success of tesla but leave their first few generation mass-produced models to the die hard fans

Same here, though that is conditional on a friendly environment for financing to reach the longer term.

And it also assumes that skill in the (relatively) low volume production of rockets can be transferred to mass production of cars.

Tesla's bet with Model 3 has no room for long term if it fails.

If Model 3 is not a success money runs out. There will be large changes in the ownership. Musk might sell Tesla to some other manufacturer etc.

The entire car part of Tesla’s business could disappear and it would still have a story for shareholders in stationary storage alone. They’ve said half of their battery production will go there. Think about what that means for revenue.

The Semi is a huge market.

And even if Model 3 didn’t exist and Tesla pushed itself as developing Model S as the number one car for self driving mobility services, they’d still have a claim at the lions share of the automotive market. Vehicle cost is a much smaller concern in the post-self-driving world.

Let’s imagine Model 3 only pulls Model S numbers, and their annual production only goes to 200k by 2020. I don’t think that’s enough to see a total collapse of the stock the way you seem to be suggesting.

I think Elon has many more cards in play than you let on.

Is this your personal toughts and hopes or real analysis?

I have yet to see any financial analysis based on Tesla financial that don't see Model 3 as a critical.

I couldn't find exact numbers but it seems like Must owns around 20% of Tesla. Some shares are locked down and secure around 1.6B of loans from Goldman Sachs and Morgan Stanley.

Not sure if Musk will be actually making any decisions here when things go south.

It's worth noting that Tesla isn't starting from bare earth, they inherited a complete factory (NUMMI) that at its peak produced over 8000 cars per week. They've already adapted that factory to make two models, so adding a third model might well be expected to take far less time than siting, permitting, and constructing an entire factory from scratch as was done in Luqiao.

>Apparently, what they are really arguing is not that Tesla is bad at production, but that Tesla is trying to do something nearly impossible.

>And if they fail, they failed because they took on a challenge that was simply too hard for any company to achieve.

From the way that Musk has recently embarrassed himself arguing with transit experts on twitter over the last few weeks I am increasingly believing in the possibility that Musk thinks he's the smartest guy in the room, is completely ignoring experts in the field, is trying to do something that actually is impossible, and he's doomed to failure.

He's done the impossible how many times?

The impossible as defined by experts in the field? Most people count three. _Which_ three pretty much depends on the expertise of the person asking!

Paypal, Rocketry and defense startup, hyperloop, electric cars, marketing, upturning the oil industry, etc. etc, not to mention his personal (non-business) achievements.

> hyperloop

This is vaporware at this point.


Literally anything he has done is by definition not impossible.

He has done at least 2 very difficult things but let's engage in a discourse grounded in reality please.

I mean things claimed to be impossible.

I've come to see Tesla as being very bad at production lines. I've heard almost nothing but bad news about working conditions, safety, output, etc. Top it off with the massive firings that happened right as the Model 3 production was set to ramp up.

However, I'm bullish, because these are solved problems that many other people have expertise in. It's easier for Tesla to find someone skilled in car manufacturing than it is for other manufacturers to build the brand demand that Tesla has. They have solved the hard problem, but failed the easy. And when they figure out how to build cars faster, the demand is there to meet them, which means that when they solve that easy problem, they will be sitting pretty.

> However, I'm bullish, because these are solved problems that many other people have expertise in.

All of Teslas woes make me bullish on companies like Toyota and GM that understand how to build cars.

I'm increasingly questioning whether the electric drive train and the batteries are actual difficult and novel part about building an electric car.

I think it's going to be easier for GM to find people that can build good electric engines than it is for Tesla to get upto speed on how to build their cars at GM scales.

> I'm increasingly questioning whether the electric drive train and the batteries are actual difficult and novel part about building an electric car.

Batteries are made by Panasonic, who can also sell to other car makers. And both GE and Siemens have centuries of expertise in electric engines.

The biggest hurdle for the traditional car makers isn't technical, it's actually changing their mindset from a product they've been making for a century to a new one.

I find myself nodding your head at the first sentence.

I think the second sentence is agreed upon/accepted knowledge. The batteries and electrics are NOT difficult.

I'm not sure if the third sentence is relevant. Maybe it is, maybe it isn't. Tesla-like success required thinking outside of the box. If GM just started cranking out mediocre electric cars like they crank out mediocre gasoline-powered cars, I'm not sure it would have made a difference. It took a new company with a fresh approach like Tesla to drive the market.

Whether it's a GM or a Tesla that ends up winning in the long term is up for argument, and it certainly seems like it SHOULD obviously be the big existing carmakers. But they didn't seem interested in doing more than bolting an electric drivetrain to an existing car, which wasn't enough to get people excited about the revolution that electric cars represent.

GM isn't a representative example of the car industry. They'd been getting their asses kicked in the car industry for decades before Tesla came along.

Toyota is another question entirely.

You're right, of course. Tesla has made electric cars sexy to people with money, the same way the Prius made hybrids sexy (okay, maybe 'popular' is a better word in this particular example) to the layperson.

Electric cars have mindshare now. But unless Tesla can do something Toyota can't for the mass market, another automaker will likely, eventually, eat their lunch. There's no reason Toyota can't bolt on some sexy electronics; the charging network can be accomplished ... somehow, some other way. That doesn't mean Tesla goes away but it means there's a finite market of people willing to pay the premium for a Tesla the same way there's a finite market for people who want the intangibles of (say) a BMW. Unless we presume that Tesla can get their efficiency and margins Toyota-low, which.. again, they can't simply bolt on.

I suppose it's still possibly Tesla can leverage their battery and charging infrastructure to their advantage for long enough to hold off the competition though. Or at least enough to make themselves an acquisition target, but of course, their value needs to be something affordable.

> There's no reason Toyota can't bolt on some sexy electronics; the charging network can be accomplished ... somehow, some other way.

Tesla's charging network is largely a US phenomenon, really. There are 1200 public charging stations in Ireland (owned by the state monopoly electricity distribution company; there are also some independent ones), a small country (many electric cars could cross it without charging) of 5 million people. Of these, 70 are 'fast' chargers (usually 50kW). Tesla charging stations? 2.

Tesla's fast charging stations are a big deal in the US, a very large sparsely-populated country. They are less of a big deal in many European countries, especially where there are robust non-Tesla networks being deployed. Ultimately, I suspect standard fast-chargers will win out over proprietary brand-specific fast chargers.

I think a Tesla acquisition is a good best-case-scenario for them. Their brand, design, and Gigafactories will be valuable for a company with the manufacturing chops to take them on. I’m more bullish on SpaceX, and I think Musk would be better served to focus on it more.

Brand, yes; it's valuable, though almost certainly not 50 billion valuable. Design, eh, questionable. "Gigafactories", certainly not; as mentioned in the article above their car factory doesn't work. As it stands it's a liability.

The gigafactory is their battery factory, which is the limit in the supply chain.

> The batteries and electrics are NOT difficult.

Setting up a supply chain to deliver as many batteries as 2015’s entire global production at below market rate is easy?

Because that’s what they’ll need to do if they want to sell the electric equivalent of a Toyota Corolla.

Having lived in Nagoya, Japan after growing up in America, I think industrials is one of those areas where Japanese sensibilities and approaches to innovation vs incremental improvement are going to be tough to beat. Like everything in Japan, it’s not simple. My friends who run companies that supply Toyota and Mitsubishi in auto and aerospace absolutely worship the golden age of American industry in a way that I’m not sure many Americans still do. At the same time, they’re brilliant engineers that operate at extremely high standards, and are playing to win.

It will be easier for Toyota and Honda to get up to speed on electric drive train production than for Tesla to get up to speed on mass production of automobiles.

Tesla has an electric drive train, they have a car production line and they are producing electric cars.

Assuming it takes Tesla three years to reach their output goals on that production line, it will need to take Honda and Toyota less than two years to get up to speed producing fully electric drive trains, installing charging infrastructure around the world, and rebuilding their downstream in order to even have a chance of competing with Tesla in the EV market.

Nissan is the only viable competitor, and they have been competing on price against Model S. The Leaf is not a competitor to Model 3 even in the same price bracket. There simply is not the infrastructure to support the Leaf, or the salesforce willing to sell it.

This race is not just about a manufacturer building electric cars. This race is about who will be first to kill off or convert their traditional downstream to get EVs on the road at reasonable prices.

Why, in your opinion, is GM’s Chevy Bolt still being outsold by the Tesla Model S?

Also FYI “electric engines” are not a thing.

My arm chair opinion as a millennial that rides a bicycle to work every day, knows nothing about cars, and has no interest in buying an electric car any time soon:

The Bolt looks like a great car for a dorky family man while the Model S is a totally different market. Families have different needs than luxury car owners, and it's likely that these needs are not being effectively met by EVs such as the Bolt despite the a universal consensus that from car critics that the Bolt is an exceptionally good vehicle.

Funny thing, for a family car I think the Model S is perfect, and every other electric car is too small. We're on our second Chrysler 300, just because I can't find another similarly sized, similarly performing car that's half as good for that kinda money. A model S would cost twice as much, although I'd sure love to have one!

The Bolt is TINY! Family car? For what? A family of dwarves?

> Why, in your opinion, is GM’s Chevy Bolt still being outsold by the Tesla Model S?

Because the Bolt’s a boring, though electric, compact car being sold at the price significantly above a similarly boring mass-market midsize plug-in hybrid (the Prius Prime) with sufficient all-electric range for reasonable commuting, and also somewhat above that of a competing boring compact all-electric (the Nissan Leaf) while Model S is a luxury mid-size electric vehicle with far less direct competition.

The Bolt is selling into a segment where utility/price is more important, and it's got strong competitors on that dimension. That's not a sign that GM can't make good EVs, but that GM is attacking the harder segment of the market; whether that's a good or bad business decision is debatable, but if EVs are ever more than a luxury niche item, the space the Bolt is competing in is going to matter a lot more than the space the Model S is competing in.

I'd say it's a failure of GM's marketing department and dealership salesmen that for some reason steer (no pun intended) people to ICEs.

GM should be capitalizing on Tesla's failure to bring the Model 3 out. They could absolutely sell the message of "Why wait 18 months for an affordable electric car when you can drive one TODAY?"

They could devour Model 3 reservations, but for some reason are choosing not to.

Unlike Tesla, GM doesn't own its dealerships. Each dealership tries to optimize their selection for their own profit, each salesperson to optimize their sales for their own income. There's a complicated web of incentives tweaking which models are best for which entity at which time, but as a general rule if they are relatively inexpensive to manufacture and/or there are lots of them in inventory that's what they want to sell you. Trucks and those SUVs built on truck frames are always at the top of the list (Ford's F-150 is rumored to be the most profitable vehicle ever built, I think the Escalade is among GM's most profitable vehicle). If someone can create a cheap to build electric truck it might well grab the interest of dealers and salespeople, but they're never going to be excited to sell you a hard to build, low-margin family sedan regardless of powertrain.

The people who reserved Teslas would probably wretch driving a GM. That company doesn’t belong in their psyche

GM is very VERY focused on the bottom line. The Chevy Bolt doesn't have a big margin. It's likely that they'd rather sell Escalades and pickup trucks. Because they have a fat margin.

Bolt and Model S occupy two very different areas of the car market.

The base trim Model 3 and the Bolt are competitors.

IMHO I don't believe GM is serious about electric cars yet. They may be, but they haven't demonstrated it sufficiently for me to depend on it. Until they show large commitments and demonstrate that they are betting the company's future on being able to do electric cars well and to continue doing so, I'm more interested in an electric car from a company that I know does have that commitment.

Where are the billions of dollars in contracts for batteries? Until I see that or a gigafactory of their own the Bolt will be a compliance car in my eyes. Albeit perhaps the best compliance car on the market at the moment.

The Bolt might be perfectly competent but it is not "sexy".

Can you see GM making competent electric cars? Yes they can do that all day long. Can they make it sexy?

That begs the question if GM can make any sexy cars. I would say that the Corvette, Camaro ZL-1 and Cadillac CTS-V might be fair examples of what GM is capable of.

So the question is can GM make a sexy mass produced electric car? They haven't tried yet.

It doesn't have to be sexy. It has to attract people that would buy a Prius or Leaf (and neither of those are the least bit sexy). It has to get good consumer reports ratings (the Volt does)..

I was actually surprised by the Volt, since a lot of my friends and coworkers bought them. Those people generally drove Mazdas, Hondas, and Toyotas.

If Chevy kept working on their eco-friendly image and continued to produce decent enough quality cars that get good consumer reports ratings, they'll probably do fine.

> It's easier for Tesla to find someone skilled in car manufacturing than it is for other manufacturers to build the brand demand that Tesla has.

If supply was not a problem Tesla would still not sell as many automobiles as other brands. Ford sold something like 5 million automobiles in 2016. The Model 3 has 1/10 that in preorders.

Tesla has a great brand in EVs, and Tesla has great market growth, but it has to double several more times until it reaches the established demand other car companies enjoy.

I'm bearish on Tesla. Everyone ships more units then Tesla. Japanese companies are outselling Tesla on EV units. German companies are 1-3 years behind on luxury EV units in terms of quality.

I'm hedging my bet by considering the gigafactory. If we see 5 gigafacotries by 2022 they'll have a significant position in the entire CE & EV industry for decades.

The rest of the world is also building battery manufacturing. [1]. Even Tesla’s plant Is jointly run by Panasonic.


The Model 3 hasn’t even been reviewed yet. A lot of people won’t buy a product until they’ve seen it deliver on its promises and it is available to buy immediately.

You can’t compare demand for their offering to Ford’s until it’s actually... you know... offered. Model 3 is still basically in a Beta release.

> However, I'm bullish, because these are solved problems that many other people have expertise in.

Which raises the question, why didn't Tesla hire experts, like the company in the article? I suspect because Musk thinks his way is best, and, worse, hasn't yet realised that he's wrong. This would make me very concerned about Tesla's future. Ultimately, if Tesla goes bust, the brand will presumably be sold off, and someone who knows how to make cars will make Teslas, I suppose...

> It's easier for Tesla to find someone skilled in car manufacturing than it is for other manufacturers to build the brand demand that Tesla has. They have solved the hard problem, but failed the easy.

But Mercedes, Audi, BMW, etc., have an incredible amount of brand demand too. They'd have even more if they cut out their entry-level cars and only sold flagships like Tesla has done up to this point.

The reality is building a desirable car brand is not that hard. Just make absurdly expensive cars that few people can own and you're halfway there. Then slowly introduce more affordable models.

BMW in particular i'm looking at quite closely.

Unlike MB and Audi, BMW are invested in electric tech and have already been for a while with the i3 (both full and hybrid trims) and also the X series hybrid SUVs. So for them battery tech is a "solved problem". They already have a production capacity of 2.5m/yr and likely will keep the same capacity in the gas-electric transition.

> Just make absurdly expensive cars that few people can own and you're halfway there.

Not that the GTR was absurdly expensive, but i don't think that car changed the perception of Nissan much.

Other than the i3, which has a 125 mile range, all of BMWs other vehicles are hybrid rather than true EVs. Yes that’s probably the way the market will go (Toyota offer a hybrid option on nearly every model now), but it’s not really the same as a true EV like Tesla.

Also both Audi and MB have hybrid and full EVs (well VW who own Audi, and share the same platforms).

that was never the goal of the GTR though

it's more of a cost-efficient, tuner friendly car that's loaded with tech, that can take-on pretty much anything, while offering the reliability of a Nissan.

Exactly. That's what people fail to understand about the car market. It is easy to create expensive cars for high income people once you have a few good ideas and capital. Now, going from there to create a mass produced, high quality car, this is the very difficult part that only a few companies were able to accomplish. It is possible that Tesla can get there, but most people just don't understand how difficult that is.

Not only do they have brand demand, when they do enter the same markets as Tesla with their own EV they will have people flocking to them.

far too many people keep hyping numbers of Tesla's preorders or even sales of S & X while completely ignoring they don't even come close to equaling single lines of some other brands who do this year in year out

The problem is a reliable electric motor in notoriously unreliable German cars.

Actually building production lines and supply lines is a very difficult problem that needs a lot of experience, fine tuning and time. It's like building a moderately complex software. Getting most features in is relatively quick. But then debugging all issues is very slow and tedious and just needs a lot of time.

It's definitely not their easy problem.

Is this really the "easy" problem? I've often wondered to what degree maneuverability or parts availability influences car maker's designs. If the design fundamentally requires parts that are single-source or difficulty to manufacture, as Tesla's design must be, then it's a difficult problem.

Sounds like they are dicks to the blue collar guys, and are more worried about Union busting than making cars.

Tesla is at most spending 1% of their effort on union busting and 99% on building cars.

You think they spend over half of their time on union busting?

Yes, relatively speaking. The difficulty of this sort of stuff ultimately can hit the margin, so you usually are fine and have ample time if you have a relatively high margin (and no competitor in line of sight). For operationally tight businesses, this could prove to be disastrous.

Not buying it -- these headlines make me even more bullish on Tesla, and I've been following them since before they had their first investors.

Production is coming along better than anyone realistic could have ever expected, and continues to do so at an impressive and steady rate.

So what you are saying is Tesla's public announcements and investor statements should not be taken as realistic?

That almost sounds illegal.

At this point, everyone who is paying attention knows Tesla’s estimates are optimistic, including Elon Musk.

And no, there’s nothing illegal about being bad at estimating.

Compare Tesla to others and not their own targets and its clear.

Tesla has a market cap larger than Ford's, but is currently struggling to produce two orders of magnitude fewer vehicles.

How long does the market need to wait?

In what world is half of what their previously stated goal "better than expected"?

> Production is coming along better than anyone realistic could have ever expected

i think he might have knowledge of tesla's "private expectation" i.e. what tesla is seeing internally, vs "public expectation" what tesla is telling the press.

>...what tesla is seeing internally, vs "public expectation" what tesla is telling the press.

If TSLA's 'private expectation' don't match what they're targeting, then Musk will be going to jail. The SEC doesn't mess around with that type of securities fraud.

If so, I think the SEC might want a talk with someone.

So have they been lying to investors?

Very interesting reporting on Geely, but childish and pointless uneducated snarks at Tesla.

It seems quite obvious that Geely represents the latest iteration of a continuously, incrementally, optimized production machine. That's great. That says nothing about Tesla. They aren't there yet, but they could (should) get there and hopefully exceed it.

> It seems quite obvious that Geely represents the latest iteration of a continuously, incrementally, optimized production machine.

Does it? The impression I get from the article is that it's one of many. There are plants like this all over the place.

Apologies. By "Production Machine" I intended to refer to the production methodology, not just this particular plant.

Geely is also Volvo´s parent company.


I think they're extremely well positioned from a marketing POV and the first attempts at competition from Detroit have fallen flat. I expect them to enjoy a position similar to Apple where they no longer really need to be the most innovative or practical so long as they are stylish and desirable.

Sort of like how old guards like Rim and Nokia caught on with the iPhone when it was introduced?

Apple had years of experience manufacturing high quality consumer electronics at large scale with the iPod, years of experience managing power consumption on the OS level with Mac OS X, and decades of experience in user experience design and industrial design. At the peak of iPod sales, Apple managed to corner the market on NAND flash memory, to the point where they preordered entire years of production. And the iPhone was the biggest leap in user experience for a portable device ever.

The problem for the major OEMs is that there literally isn’t enough battery production capacity in the world for all of them to ship EV’s in significant volume, and there has been zero indication that they are taking steps to solve that problem. They are already years behind on securing GW-scale capacity.

That article talks about a plant that took five years to commission, and is built to make cars that have been mass produced for decades and when it is done it will have a capacity to produce 200,000 cars per year.

Why would anyone say thats even in the same ball park as a company building a assembly line for a new class of product at over double the capacity and doing it in one third the time ? Of course their factory is going to be a smoother operation they have been doing it for decades, when will volvo make a mass market electric vehicle ? You would think with the kind of demand there is for the model 3 Volvo, BMW, GM, or another one of the established manufactures would be able to exploit their knowledge of car assembly and take market share from Tesla, but so far the best anyone has done is the 30,000 units a year the Chevy bolt is expected to manage and it isn't planned on scaling much past that.

So the factory situation is a mess, but I don't think a peachy PR piece about a very different situation is any kind of nail in the coffin, just a reminder of how much the current state of the art in car manufacturing is being changed. Even companies that have internal combustion down to a science can't manage to put together electric cars. To me it shows how far ahead Tesla, it would appear the current plan for everyone else it to let Tesla figure it out and poach their executives.

It's uncontroversial that Tesla is in the "figuring it out in ramp-up a factory stage".

What I fail to see (that this article really drives home) is that they aren't actually building anything resembling a defensive moat...because they're going to run out of time. You could absolutely make the case that if they got to (mass) market significantly faster than existing car companies they could devour market share and suck the air out of the room and really springboard into their existing valuation...it just feels like they're burning the candle at both ends and that scenario seems a lot less likely (to me).

By the time they figure it out...the companies producing significantly higher volumes of cars (for a hundred years) may simply surpass their ability to ship a great EV in large numbers.

The Bolt / Leaf / i3 are basically the first-gen "hobby" projects to dip their toes in the water and get some EV mindshare. Do we really think a company like BMW can't make a desirable EV halo car + econo EV literally whenever they want as battery capacity tech progresses and mass market demand picks up? Drop an electric motor into an existing M4 and an X1 (I realize its more complicated than that) and you're basically there.

I'm guessing here, but I think the BMWs and GMs and Toyotas of the world all must be extremely happy to be last mover here for a tech that feels like, at this point (thanks to Tesla!), will become an inevitable commodity technology. Meanwhile they let the Tesla brand do the hard work of getting the pubic amped up about EV with none of the risk and swoop in when it makes sense to them to move their existing brand onto a new and better electric platform.

I think its more then just waiting for it to become commodity tech, the big companies ( aside from Porsche at the very high end ) don't have anything on the table that remotely comes close to the Tesla portfolio, and cars don't just show up over night. These companies have roadmaps out for five years with no plans to enter the EV marketplace in any kind of scale. I think they are slow moving not because they are waiting to test the waters, I think they are slow movers because they don't have the skills in house to design these cars, and they are selling plenty of IC cars. This is the classic Innovators Dilemma and Tesla appears to know it. Musk could have slowed things down and given the big players time to acclimate, but by forcing the production timeline he essentially made them choose between sinking lots of their talent into EV design at the expense of IC design or essentially letting Tesla have the EV market and hoping they can jump in once their current product lines start to suffer. Their only move once the IC market start to lose share to EV's will be to try and poach some of the talent that has been cultivated at Tesla and hope to catch up.

  "In the last seven working days of the quarter, we made 793 Model 3's, and in the last few days, we hit a production rate on each of our manufacturing lines that extrapolates to over 1,000 Model 3's per week" - from Tesla's release. 
Also another 860 Model's in transit currently that will count in Q1. It's getting there.

Yeah, this HN headline seems intentionally negative considering their current weekly production rate is somewhere between 40%-60% of what they produced in all of Q4. Therefore focusing on their total Q4 is misleading regarding their current production. Why not use the article's actual headline?

EDIT: And now the headline has been changed to match the article. Good move. The original headline on HN was something along the lines of "Tesla only delivered 1,550 Model 3s in Q4".

That's interesting because I strictly copied the title over from Reuters website. You can see the same link still goes to the article... yet the title on Reuters has been changed.

Putting my tin foil hat on, someone at Reuters stockpiled their stock or truly loves the company :)

It is pretty common for an article that is written about breaking news like this to be heavily edited as time goes on. The last edit on the article is listed as occurring after I left my comment. I would bet the original headline was written in a rush and eventually one of the editors at Reuters had the same objection as I did and rewrote it with a less negative slant. In fact, the current headline is even more positive than the one I last saw and that currently appears on HN. They appended "despite progress" at the end.

No, much more likely that they A/B test headlines. It's standard practice among news orgs at this point.

so they almost hit 20% of their goal from 6 months ago?

“Tesla said it now plans to reach its goal of 5,000 vehicles per week by the end of the second quarter”

And it’ll be another 6 months before they get to 5k/week. They have 500,000 pre-orders. it’s going to take between 2-3 years to deliver.

Personally, I’ll take 1,000 Model 3’a a week. It’s a great improvement.

Haven't they moved that goal back 1 quarter every quarter so far?

If it's an (initially) exponential ramp-up, yeah?

Relatively speaking, it's still a fast ramp-up rate.

I guess I'm just wondering what fraction of investors decision to hold TSLA is "We never believed Musk's deadline to begin with" and what fraction is "It's only a 6 month delay, so not a big deal"

From my point of view it looks like they are trying to do something that would normally take 5 years in 2. Even if they "fail" and it takes 3 years, that's still faster than the "normal" way.

That's assuming that they take longer than they said, but still get a functioning plant. They could, alternatively, after 3 years, end up with a plant that doesn't work, and won't work in another three years. Manufacturing is difficult, and "delayed" isn't the only failure mode.

Yes but that's always a risk, and I don't think that's any more of a risk with Tesla than it would be for any other manufacturer.

We know that manufacturing can be done at the scale they need, because many others do it at that scale. So in my mind, the odds that they end up with a non-functioning plant is pretty small. They have a lot of capital, and no shortage of people willing to invest.

Compare that with SpaceX. They tried to do something that only a few others have ever attempted (reuse rockets reliably and inexpensively) and the US government had basically failed at (with the shuttle not being inexpensive by any means). This was coming from a rocket company that had just had their first 3 launches end in failure, was nearly broke, and was the laughingstock of the industry.

But Musk doubled down, and poured a ton of his own money into the company and they were eventually able to achieve their goals (more honestly, i'd say they have currently achieved about 70% of what they wanted, but most of the other 30% is still possible, just taking a lot longer than they though). And while you could make the argument that Musk wouldn't do something like that with Tesla, I think it at least shows that he's not one to give up when things start looking really really bad.

I'm in the never believed Musk camp, but I like people setting high goals and achieving them, even if a little late.

Tesla essentially went from test production in Q3 to matching Model S/X weekly production by the end of Q4.

While they are still ~6 months behind schedule, the way they are able to kick off an entirely new line is still impressive in it's own regard.

Remember, Elon Standard Time.

One has to add the over 800 Model 3 which were made, but not delivered to the customers yet. So they made about 2300 Model 3 in Q4. And Tesla claims to be hitting a rate of 1000/week in the last days of 2017. So the production speed is picking up for sure. Not as fast as promised, but it is picking up, and probably will continue to rise significantly across Q1.

But why weren't they delivered? Because they couldn't ship them fast enough or because the cars aren't finished yet?

Because they were made in the last week of the year, and it takes a couple of days to ship them to the destination service center which has to make an appointment with the new owners to do the delivery and finish the paper work. Tesla counts a car as deliverd only when the new owner has taken posession of the car. So Tesla always has quite a few cars in transit - about 2000 S/X and the end of Q4 and over 800 M3. Deliveries to the east coast and of course Europe take accordingly longer.

I understand that people are reacting to the "missed expectations", but the reality is that everyone knew that their original production goals were very aggressive.

Here's the bottom line: If Tesla originally planned to produce 250,000 Model 3s in 2018 (5,000 per week * 50 weeks) and only ends up producing 150,000 (1,000 per week for 6 months + 5,000 per week for 6 months) I don't think that's going to be a problem in the long run.

Their only real competitor right now is the Chevy Bolt.

The Bolt has similar range and price to the Model 3 but it has at least 2 disadvantages:

(1) GM is not really aggressively pushing the Bolt, allegedly because it is selling them at a loss

(2) Tesla has the super charger network.

Conclusion: These delays don't like they will have any long term impact.

Their constraint is not competition but cash. They already have a lot of debt. If they cannot ramp up production as forecast, future cash injections could be hard to get.



Q32016: 25,185

Q42016: 24,882

Q12017: 25,418

Q22017: 25,708

Q32017: 25,336

Q42017: 24,565

Anyone else noticing a pattern here?


I'm amazed the extent to which investors are willing to shrug off this kind of news when it comes to Tesla.

Missing production targets is obviously bad, but after giving this announcement more thought it doesn't seem like awful news if you put this in context with other EVs rather than Musk's always overambitious projections.

Tesla says they are producing Model 3s at roughly 1000 per week now. Considering they are selling Model 3s as soon as they can build them, that would make the Model 3 already the 2nd best selling EV. The top seller is the Model S at a little less than 1,200 per week. The way production is currently ramping up the Model 3 will become the best selling EV sometime in mid January to early February. That isn't as fast as people wanted, but I don't see how this would be a sign of some overall failure with long term side effects rather than a temporary stumbling block as they ramp up production.

If I was a long term investor of Tesla, I don't think this would have me worried and I might even try to pick up some extra shares tomorrow at a discount.

Maybe its just because I've been holding TSLA for years, but it all feels so short sighted when people panic and doom-say about stuff like this.

People have totally forgotten how the Model X ramp up went (badly[1]). This is nothing by comparison. In a couple years people won't remember that predictions were off yet-again by 6 months. They'll be driving electric cars instead.

[1] Mostly due to overly complex components like the doors, but still, the X ramp up was abysmal, and everyone has mostly forgotten about it. Consider that your foreshadowing. I'm certainly glad I didn't sell.

How long does Tesla have before it runs out of cash? I know they just had a bond sale or something, but I'm fuzzy on the details.

They have well over $3B cash on hand and no problems with the bond/credit markets.

Do you think they'll still be burning all this capital to build the 5k/wk ramp up a year from now?

> ...no problems with the bond/credit markets.

That's simply not true. Their last bond issuance was well into junk bond territory, its unlikely they could issue another round without entering into insolvency.

Tesla's only option, should they need cash, is to issue more equity, which has its own set of problems.

I'm sure they could raise more money but interest would probably be too high for it to make sense. They're already at a B- rating, a downgrade at any of the rating agencies would put them on the lowest (non-defaulted) rating. New debt would then probably carry 8-10% interest. Probably cheaper to raise equity by selling part of the company to another manufacturer.

At their current reported burn rates, they will go through $3B in 8 months.

I'm going to go out on a limb and suggest that the crypto boom is going to produce a handsome windfall for tesla.

How do you figure that? Elon invested in BTC and ETH? :)

Elon, Aka Satoshi ;-)

Different Tesla.

Please explain

Maybe bitcoin millionaires will be buying Teslas?

the meme is usually lambos (something like this: https://totallycrypto.com/wp-content/uploads/2017/11/DSC3452...)

Actions speak louder than words though.

I don't personally know of any crypto-millionaire... do you?

Yes, I know 3.

Bingo, we have a winner!

PS: Tough crowd

Musk has painted himself into a corner. He is probably aware that skipping the hard tool test phase was a bad idea, but had no choice, they would've run out of money adding another 6-12 months to the model 3 timeline.

What they're probably seeing now is lots of model 3s coming off the production line with non trivial faults (as to be expected), and stock-piling those because they can't afford to stop the line and fix root causes. Fixing all those stockpiled 3s will take a hell of a lot of time and $$$.

Fair chance Tesla will go into BK in the next 12 months or so if you ask me..

Bankruptcy? Doubt it. They didn't go bankrupt in 2008 when they had not much more than a few prototypes (that overheated), some gliders, and an idea.

Tesla has been here before and worse.

They had $21.9bn liabilities in Q3 2017, compared to $489m in 2011. Couldn't find 2008 numbers but sure that debt was much lower then. Bankruptcy doesn't just mean having low cash levels, it means not being able to serve debt in time. That risk has increased meaningfully with increases in debt. Missing the coupon on one of their bonds by just a few days would put them in technical default and could trigger bankruptcy.

Apple struggled with the production of their first iphone too. The good thing is that you have tons of orders and market hype.

market hype. market hype -> This thing is invaluable.

Apple sold iPhones at the rate of three per second when the first iPhone launched on time, on June 29th 2007, having been announced to launch on that date in January of 2007. I guess it's possible that they "struggled" to do so, but Apple launched the iPhone on time and in the quantities promised.

But this isn’t their first car. They’re not even pushing the envelope that much (Apple was) compared to the Roadster, S and X.

It seems like they should be much better at this by now. Maybe not GM or Toyota, but better.

This isn’t Tesla’s first car. They shipped 100,000 cars last year. Must be a problem making the battery?

I've heard they continue to have had big steel welding problems. Earlier cars were composites and aluminum but ramping up production of steel cars is a very different manufacturing technique. http://autoweek.com/article/car-news/tesla-might-be-missing-...

The rumors have been they are still using 1980's manual production line techniques https://www.harborfreight.com/welding/spot-welders/240-volt-...


> Poor welds can increase the damage to a vehicle in an accident, and can lead to rattling and squeaking as the car ages, Tracy said.

That sounds interesting. Subpar welding will be impossible for buyers to spot and could take years before becoming obvious.

That article's only evidence is some sparks flying that look exactly the same as the welding in other mfgs videos.

The link to the cheap spot welder is a bit over the top as well.

Interesting to hear someone having problems welding steel instead of aluminum. Generally Al welding is much more difficult than steel.

Robots seem to be better at welding aluminum than unskilled humans, they appear to be ok with spool guns and adhering to consistent tolerances and settings. Until now Tesla has mostly been attaching composites to aluminum monocoques using relatively low production run specialist car building techniques. Banging out masses of low cost cookie cutter cars is a different dynamic involving lots of spot welds...

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