Hacker News new | comments | show | ask | jobs | submit login
Tesla plans China factory that can make 500,000 vehicles a year (latimes.com)
93 points by JumpCrisscross 77 days ago | hide | past | web | favorite | 110 comments



Tesla should be very wary of the very real threat from corporate espionage in China. Brining a factory to China would allow a bad actor to really get into enterprise and create even better clones. Tesla wouldn't be able to keep up financially if Chinese manufactures built cars using Tesla research resources.

side thought: Maybe TESLA turns into a research company that sells its IP to manufactures instead of actually building cars.


I’m not into cars, sorry if it’s a stupid question.

Does Tesla have that much valuable research ? I thought their manufacturing process came from external actors with experience in “legacy” car makers. Same with their batteries technology, didn’t big players like Panasonic intervene to bring their experience ?

Regarding AI or software they don’t seem to be ahead of the other players either.

From a distance, Tesla looks like a company that believed in bold ideas and had the chops to execute on them. Is there a “secret sauce” outside of that ?


Tesla invented battery management technology to scale up bundles of small lithiun ion cells. This requires significant engineering to get right: cells charge and discharge at different rates, heat must be managed and failed cells taken out of the stack. Nobody was doing this commercially when they built the first roadster. IIRC they shared this tech with Toyota pretty early on.

This is all basic electrical engineering, and now reproduced by other carmakers, but Tesla did it first.

For example, when I was at National Semiconductor working on Solar tech (2010ish), another team was building systems for lithium ion battery management for cars. They did this to sell the tech to car makers.


>Tesla invented battery management technology to scale up bundles of small lithiun ion cells.

I dispute that claim. They may have created a solution for use in their vehicles but did not "invent" anything, they just upscaled existing solutions and used existing know-how.


Thats how all invention works. Scaled up versions of existing tech.


I think their advantage comes in the fact that their car IS a computer. They're the only OEM that can do meaningful OTA updates to the car. It is a massive advantage and none of the other manufacturers have close to the same infrastructure.


My understanding is that, like SpaceX, Tesla's goal is to build a large number of the required parts in house, enabling rapid design iteration. There is also a goal to automate a large proportion of the manufacturing process, although it has become clear that the limits of current technology are being tested here.


Teslas stated goal is improving the adoption of sustainable energy; selling cars is only a part of it.

Perhaps they feel that a little espionage is worth it to get 500000 electric cars a year onto Chinese roads?


Came here to say this. Considering Tesla has already opened up their patent library, I think they're begging the industry to copy them.


Tesla stockholders might feel differently maybe?


So China can steal Tesla's method of sloppily making fewer cars at a loss? If they have a secret sauce it surely isn't inside the factory.


Upvoted for funny.


I'm doubtful this will happen, based on what we've seen in the car industry in the past. Foreign car companies have had to build cars via Chinese joint ventures for decades, and as yet, not a single Chinese car company has seen any large success outside of China.


The Chinese market is large enough for them to not care about anything outside of China for now. There are various cheaply made clones of popular Western cars in China and none of them will pass any Western crash test.

The advantage of those cars on the Chinese market is that they cost only a fraction of any Western car and middle-class Chinese can actually afford them.


Chinese companies don't need success outside of their domestic market to become powerhouses. American truck sales have subsidized Ford and Chevy's international divisions and, while the USDM is currently larger than the Chinese market, that won't always be the case. It's very likely that the manufacture who displaces VW as top car producer in the world will be primarily focused in the Chinese domestic market.

Additionally, the sheer number of copycat vehicles available from Chinese automakers suggests that distribution of IP and technology within the industry is pretty common. Be it from sharing, theft, or reverse engineering.


China decided to change its rules on this point last April[1]. Not sure of the whole overall political reasons, but I imagine it has somewhat to do with the stronger US stance against China on trade issues with the new US president. Telsa was not going to build the plant under the previous rules and now that they are changed are going forward.

[1]https://www.marketwatch.com/story/tesla-to-build-factory-in-...


It's happening, though. I think some Chinese car markers are eyeing the international market, while Geely just bought Volvo and is introducing new brands (Polestar, Lynk&Co) on its basis.


AFAIK, Chinese people themselves tend to prefer foreign cars, see them as higher quality status symbols.


Indeed. Some cultures in Asia are very "look at what I have", BMW and Mercedes do a lot of business over there to their equivalent of middle and upper classes.


Difference classes have different preference. For normal families, they would prefer affordable domestic brands, and for higher classes, they would buy foreign brands, or fully imported cars. But most people would buy domestic ones which is easy to understand


> side thought: Maybe TESLA turns into a research company

TESLA's secret is that they're a battery company. I don't think people understand how big of an issue energy storage is, and what the resulting opportunity is. Energy storage to Tesla is what AWS is to Amazon.


Panasonic makes Tesla's batteries, and as far as I know Tesla doesn't have any proven battery technology that's better than anyone else's. I know people who work on battery technology. Pretty much every chemistry department at a major university has people working on batteries. You often see publications about breakthrough's in battery tech from these universities. Very few of these alleged breakthrough's make it to market, so I'm skeptical that Tesla can succeed where so many others have not.


You have to understand the narrative you’re responding to. It goes something like this: Elon Musk doesn’t care about making money, he wants to save the world. The money he makes, he just wants to spend on achieving that goal. SpaceX isn’t about making money as a cargo service to Low Earth Orbit, it’s about establishing Mars colonies and the LEO technology is just fundraising for Mars. Tesla isn’t a car company, it’s trying to bring unit price of batteries down, it’s a solar/battery company, the future of clean energy. The whole car thing is just fundraising/PR for world-saving business.

If you point out that Tesla is a car company using Panasonic batteries, you get speeches about how they’ll be the next GE and you don’t get it. If you point out that Tesla is up to its eyeballs in debt and can’t peoduce even the cars it tries to make without serious flaws, in a tent, you get speeches about WSJ, Big Oil, Shortsellimf conspiracies. The True Believers ignore the reality of a publicly traded company struggling, in favor of a narrative spun around Musk’s tweets and promises.

It’s a cult, I think one born of existential dread about environmental collapse and a desire to see it fixed by a visionary billionaire who tells them they don’t have to make any sacrifices, just buy a fast car. I think that arguing with them ends up with a similar response as criticizing Google 7 or 8 years ago. Some things just have to play out, and until then it’s all “crush the non-believers!”

Edit: Again, don’t just downvote, downvote and rebut.


A battery pack in a Tesla car has much more to it than the cells themselves. There are cooling systems, monitoring systems etc. Tesla's battery packs are way ahead of anyone elses and produced at a lower cost per kWh

E.g. https://www.forbes.com/sites/greatspeculations/2017/08/18/ho...


I'm pretty sure that GM have been doing their own battery pack testing, R&D and integration for quite some time now, even partnering with a local university to train people on this. The main component they outsource which Tesla develop in-house is the motor and its controller, and that's obviously pretty vehicle-specific.


I'm skeptical too, but that's besides the point. My point is that (1) energy storage, if a breakthrough is achieved, will have a serious economic benefit to Tesla (e.g. profit) and (2) I believe Tesla's strategy isn't just to sell cars, but to compete (and frankly dominate) the energy storage market. And just like Apple needs Samsung and Foxconn to manufacture it's market dominating iPhone, it looks like Tesla needs Panasonic to do the same in the energy storage market.


Ancient Rome exported its wine agriculture technology to France so wine could be created in abundance and cheaper. Look how well that worked out for Italy.

"...The founding of France's other great wine regions is not as clear. The Romans' propensity for planting on hillsides has left archaeological evidence of Gallo-Roman vineyards in the chalk hillsides of Sancerre. In the 4th century, the Emperor Julian had a vineyard near Paris on the hill of Montmartre, and a 5th-century villa in what is now Épernay shows the Roman influence in the Champagne region.[13] "https://en.wikipedia.org/wiki/Ancient_Rome_and_wine


From the same wiki article: "The wine trade in Italy consisted of Rome's sale of wine abroad to settlements and provinces around the Mediterranean Sea, yet by the end of the 1st century AD, its exports had competition from the provinces, themselves exporters to Rome. The Roman market economy encouraged the provinces’ exports, enhancing supply and demand. An elevated supply of wine meant lower prices for consumers."

If that's true, then it worked out well for Romans wine consumers, likely freeing them from local wine-making monopolies, and also for the development of regionally unique varieties of wine.

Also, what is the relationship between Roman wine making technology and Teslas? It's not like China doesn't know how to make electric vehicles - they already produce many more that the US does.


Aren't TESLA's patents all openly available anyways?

https://www.tesla.com/en_CA/blog/all-our-patent-are-belong-y...

I mean maybe some research espionage might steal a technology from them before they patent it - but if they wait until AFTER then they can use it.


If someone wants to spy on Tesla and steal their secrets having the factory in the US or China or both is not going to make a difference.


If we'll be getting a cheap electric car thanks to that I'm fine with a bit of espionage


You won't. If a company can't reap the rewards of it's own research, that will stop. Then we race to the bottom with price leadership instead of feature leadership.


I think you might be surprised just how many people care more about price leadership than feature leadership.


Doesn't Microsoft, Apple, Cisco, AMD already do that?


This doesn't really makes sense. Apple has been manufacturing there forever and in the process became the most valuable company in the world.


"Chinese car" will end up becoming synonymous with bad AI and fundamentally unsafe.


Do you really think a Chinese company hasn't bought a used Tesla, put it in a cargo container, and shipped it back to dissect physically and to try and reverse engineer every last scrap of code they can get at?


I mean, all they need is a few hand tools and an optical comparator for the parts and some creativity for the code.


The advantage of a great technology company is its ability to continue innovating, make hard decisions, and maintain a commitment to quality.

You could take all of Tesla's IP and hand it to any company and they couldn't do anything with it except use it to burn money.

Tesla is the first choice for great engineers interested in its fields of work. The reason is that Elon Musk wants to help them do great work and he actually knows how to help them do it. He's not perfect but he's the best there is today and he's only getting better.

Great technology companies are like massive gravitational anomalies for a specific field. Until their power fades or a more powerful anomaly comes along it's impossible to beat them.


You could take all of Tesla's IP and hand it to any company and they couldn't do anything with it except use it to burn money.

So far, that's all Tesla has managed to accomplish as well...

The advantage of a great technology company is its ability to continue innovating, make hard decisions, and maintain a commitment to quality.

One noted problem that Tesla faces is that Musk is frequently unable to make hard decisions because he spends so much time micromanaging...he's easily distracted by the latest new "thing" he wants each car to have. As for quality...many people who have ridden in or owned a Tesla would dispute the notion that Teslas are quality cars. You can get much better built ICE cars for a quarter of the money, hybrids for half the money, and competing EVs for 2/3rds of the cost of a Tesla.

Tesla is the first choice for great engineers interested in its fields of work. The reason is that Elon Musk wants to help them do great work and he actually knows how to help them do it.

The many engineers and AI scientists who have left Tesla in the past year would strongly disagree with that statement. Musk has frequently forced his engineers to do things based on marketing goals rather than sound engineering principles.


Apparently Tesla is the first foreign-owned auto manufacturer that has been allowed to open a facility without giving a 51% stake to a Chinese owner. I think it's only electric vehicles which are eligible for this new scheme.

There's a huge demand for non-polluting vehicles in China, so expect other automakers to begin looking at similar factories in that country.


That's unusual that they were allowed to do that. Does the government have any stake Tesla's plant? Or just not 51%?


They seem to say so each year...

Just from 2016:

https://mashable.com/2016/06/24/tesla-factory-china-9-billio...


"a person close to the matter told Bloomberg"


Excuse my ignorance, can someone explain how they are going to pay for this? My internet experience in the last months has been mostly articles about how they would keep enough cash with one factory? Then others about Elon said no more cash raises, etc... Even if they start turning a profit on their cars, that isn't going to magically give them the millions (billions?) needed for a new factory.


It’s a preliminary plan to build something... so basically a fantasy at this point. It’s also an old fantasy, he’s been saying this for at least two years.[1] Mind you...

Musk said in May 2016 that he expected Tesla would produce 500,000 vehicles a year in Fremont by 2018, but the company has repeatedly fallen short of his manufacturing goals with the Model 3 sedan. Tesla built about 88,000 cars in the first half of this year.

With Musk and claims YMMV, and it pays to believe it only when and if he delivers. In this case there is no reason to believe it isn’t what he does best: PR.

[1] https://mashable.com/2016/06/24/tesla-factory-china-9-billio...


By issuing the debt and new shares that Elon swears he's not going to do.


You're misconstruing what Musk actually said. He said they're not going to need to issue / raise in 2018. They're not going to begin building a factory in China this year and won't need financing for it in the next five or six months.

Edit: for the anti-Tesla downvoters -

"CEO Elon Musk has said that Tesla wouldn't require new funding in 2018, in either equity or debt. On a call with investors, in response a question from Morgan Stanley analyst Adam Jonas, Musk said that when it comes to raising new money, "I specifically don't want to." "

http://www.businessinsider.com/elon-musk-on-raising-more-mon...


The year doesn't matter, I have full confidence he'll keep saying they don't need to raise money right up until the day they raise money.


I can’t wait until they can run a factory in the USA that could make 500,000 vehicles per year!


They’re currently at about 350,000/year, so not too far off.


Using your numbers that would mean increasing their output by over 40% without a new factory... I'd say that is very much "far off". I mean they had to make a tent to try and convince Wall Street they can make 5,000 cars in a week.

In reality they make nowhere near 350k cars a year. They built 41k in Q2 which was their most ever by a long shot. They celebrated the 300,000th shipped Tesla in Q1 2018...


That NUMMI plant used to do ~430,000 vehicles per year so Tesla in theory could produce that many without expanding to a new facility but the shortfalls of a plant on the West Coast away from so many suppliers in a very high cost-of-living area are going to make that a much less attractive proposition. I wouldn't be surprised if they're in talks for a South Carolina or Alabama facility to produce their Model 3s and if they reserve the Fremont facility for their higher-end models.


These other factories would have to be completely retooled. It would take a long time and a lot of money. It's not like changing the die in an injection mold or something.


Yeah -- I meant, they'd have to build a new factory from the ground up, spending billions of dollars to do so.. not that they could just lease a Corolla plant or something.


They’ve increased their numbers by about 250% over this time last year. Another 40% isn’t that much by comparison.

At the end of Q2 they hit 5,000 Model 3s per week, plus 2,000 S/X. That’s an annualized rate of 350,000.

And yes, they haven’t even built 350,000 cars yet. The acceleration of their manufacturing over the last few months has been amazingly fast.


Production stats:

Q2 2018: 53,339 Q2 2017: 25,708

Still impressive, but not an increase of 250%.

http://ir.tesla.com/news-releases/news-release-details/updat...

http://ir.tesla.com/news-releases/news-release-details/tesla...


Production stats: 7,000/week at the end of Q2.

Am I just not making myself clear on where the 350,000/year figure came from, or are you ignoring it to make some sort of point?


Extrapolating from the crunch week is just wrong. It featured:

1) A temporary production line 2) Reworked cars included in the total 3) 24x7 production, all hands on deck 4) No downtime for maintenance 5) Went on for 175 hours, not 168 6) Whatever else that went on that's not public (almost certainly some stockpiling of parts)

Maybe you can draw some inferences from the outcome but N x 50 is not the way to do it. Output will certainly drop in the short term, it's just a question of how much. In the long term, maybe they'll do better than 5k a week, maybe they'll eventually reach there as a steady state, but even the latter isn't guaranteed.


This is an actually useful response, instead of just ignoring what I’m saying and quoting numbers I already know.

I think they’ll sustain this rate. We’ll see.


I wonder what other countries they considered, did they consider Mexico ? (Ford has plants there) or Brazil? Or perhaps India?


Not an expert but I believe controlling Lithium reserves is a great way of attracting companies that rely on Battery tech?

[1] - https://qz.com/1292202/china-now-effectively-controls-half-t...


TFA states that this is primarily to serve the Chinese market and secondarily other countries in Asia. Wouldn't make much sense to put the factory in Mexico or Brazil.


I believe the primary reasons are that China, together with Hong Kong, is already one of Tesla's largest markets and it has a great potential for growth as well.


At some point, you have to expect that single party control of a government that is hostile to clean tech and initiating a trade war with the worlds largest consumer market for the next 50 years is going to accelerate the exodus of brains and production from the US, too.


Is China hostile to clean tech? I thought they were one of the biggest driving forces behind clean energy out there.

They also pollute, a lot, because they produce a lot of energy full stop. Afaik they do everything and anything, right now.

Burning coal doesn’t make you anti clean energy , it just makes you a polluter. It’s a bit ironic , but then again: welcome to China :p


Throwaway5752 is referring not to China, but rather the USA, as having “single party control of a government that is hostile to clean tech and initiating a trade war with the worlds largest consumer market for the next 50 years“.


That makes complete sense, and I totally missed it. Sorry, and thanks!


No, it's odd to think of the US in those terms and still feels strange. I understand!


Also big fat tariffs on non-Chinese-made imported cars which make them non-competitive. Basically, China does not believe in free international trade.


electric vehicles are much more common in China than elsewhere - for example Shenzhen adds an extra tax to non-electric taxi rides (the blue taxis are the electric ones), and bans gas powered motorcycles (compare rush hour in Shenzhen with Taipei or Hanoi!) - I think that aiming for the luxury market there is a sensible thing to be doing


India would be a really poor choice compared to china due to corruption externalized costs


I'd say the current administration in India has the willpower and execution to bring big names. Problem is with an ecosystem including the necessary infra to set up something like this.


I think Nvidia should be as worried about IP theft as Tesla. I remember from the Model 3 teardown, the commenter was saying the Tesla logic boards were way above the quality of the other car manufacturers. He compared them to cell phone PCBs.


Hopefully for export, otherwise they'll unfortunately mostly be powered by coal :(


China uses more coal and produces more CO2 for electricity, but uses less total fossil fuels (60.6%) than the US (64.2%). https://en.wikipedia.org/wiki/Electricity_sector_in_China VS. https://en.wikipedia.org/wiki/Electricity_sector_of_the_Unit...

China has a significantly higher % of it's electricity generated from renewables than the USA and a much faster adoption curve. So, adding electric cars is still a very large net gain for the environment over IC cars.


The US is about 1/3rd coal, 1/3rd gas, and the rest carbon neutral (mostly nuclear). China is about 2/3rds coal, a tiny bit of other burning stuff, and the rest carbon neutral (mostly hydro).

Looks to me like the US is much better for emissions. Especially since US coal plants are probably a lot cleaner.


China is ~56.4% coal and dropping fast which is a long way from 2/3's. This is down from 81% in 2007 so having recent numbers is really important.

USA happens to have a lot of natural gas which is better than coal for the environment but still much worse than solar/wind etc. Further, because they still use a lot of coal and they use more total fossil fuels it's not as a big a difference as you might think. Really the important question is what is going to come online to fuel electric cars, and that mix is vastly better than oil especially when you include extraction, transportation, and refinement.

PS: China is something like ~58% coal equivalent vs ~47% USA coal equivalent (assuming natural gas produces 1/2 the carbon of coal.)


>China’s energy companies will make up nearly half of the new coal generation expected to go online in the next decade.

https://www.nytimes.com/2017/07/01/climate/china-energy-comp...


That's not saying what you think it's saying. "Chinese corporations are building or planning to build more than 700 new coal plants at home and around the world."

Coal is very much on the way out, but it's not quite useless yet. Far more coal power plants are going to be destroyed in the next 10 years than built. But, if you are going to build a coal powerplant then paying a Chinese company can be a good choice.


Fact is, they're building more coal plants in the country because they can more quickly meet energy demands with coal and as of last September the world was building coal plants faster than they were being closed (and I suspect China is).


"Shanghai Electric Group, one of the country's largest electrical equipment makers, has announced plans to build coal power plants in Egypt, Pakistan and Iran with a total capacity of 6,285 megawatts — almost 10 times the 660 megawatts of coal power it has planned in China." So yea china is still building some coal but not that much looking at actual production presents a different story.

Electricity production in China (TWh) From coal

  2014	4,354
  2015	4,115
  2016	3,906
https://en.m.wikipedia.org/wiki/Electricity_sector_in_China


Can someone more knowledgeable tell me what good a MOU in China is?


> what good a MOU in China is?

Jack shit.


You do realize China is the second largest consumer market in the world? If MOU were jack shit, people wouldn't be doing business there. Many companies intentionally share their IP in order to do business in China.


> If MOU were jack shit, people wouldn't be doing business there

It’s a great place to do business. Their MoUs and LOIs are worth jack shit.


This is not some mom & pop shop, when multibillionaire companies sign billions of dollars of MOU, it has to be worth something.

You could argue MOU is jack shit in general, but saying MOU is jack in China but China is great to do business with does not a computer, considering some of the largest companies in the world are signing MOUs and going ahead with their project just fine.


> You could argue MOU is jack shit in general

MOUs from non-mainland companies may get you financing. MOUs from mainland Chinese companies will not. They have a high rate of falling through, and are most properly treated as prettified e-mails. Different commercial cultures.


No faster way to kill your company than to do business with China.


Just look at the dead husks left by Apple, BMW, and Cisco!


With the exception of Apple, you do not have a great point.


Unfortunately, our website is currently unavailable in most European countries. We are engaged on the issue and committed to looking at options that support our full range of digital offerings to the EU market. We continue to identify technical compliance solutions that will provide all readers with our award-winning journalism.


This seems to be an issue with all tronc (née Tribune) papers: https://news.ycombinator.com/item?id=17480636



At least they're no longer blocking non-EU European countries (had that issue a few weeks back).


Yes it took me 5 seconds to move my VPN to Canada.


This article is blocked to the EU.


Because the LA times, being a local newspaper, doesn’t want to bother with EU laws.


http://archive.is/GQAO3#30%

The layout is a bit broken, just scroll down.


"This article is only available to readers that move their VPN server to Canada"


Great idea! Take billions in US taxpayer subsidies, then give away all of your technology to our biggest geopolitical and economic competitor. All because mass manufacturing is "boring" and "hell" and you can't keep up with demand.


There's a story behind the story re: Tesla's scaling difficulties. America has lost its manufacturing base and with it the skill set to build large scale manufacturing easily. Tesla is going to China because that's where the expertise is.


No, it's because China is the largest car market in the world (yet is not a significant automobile exporter because that's not where the expertise is). Also, this:

> Last week, in response to tariffs imposed by the United States, China increased the import duty on U.S.-made cars to 40%, prompting Tesla to raise prices. A plant in China also would reduce shipping costs and could make sourcing components more economical.


TIL tariffs are good for the environment.


America has lost its manufacturing base and with it the skill set to build large scale manufacturing easily.

There's a reason why the NUMMI factories failed in the first place. The Hawthorne factories were located in the wrong place. The region's culture and human capital couldn't support the best efforts and know how of Toyota. It worked in Brazil, however.

https://en.wikipedia.org/wiki/NUMMI#Makeover


NUMMI failed because it was located thousands of miles away from the automotive parts supply chain centered in the Midwest. The distance made the logistics too expensive for the plant to be cost effective during the recession. If not for the recession reducing demand for automobiles, it is likely that the plant would have remained open and led to the development of a supply chain on the West Coast.

Meanwhile, the numerous aerospace factories in Hawthorne and the LA South Bay seem to be doing fine, largely because LASB is the center of the private aerospace parts supply chain.


I love this excerpt from your link:

> the need Toyota had to start building cars in the United States, a requirement due to the possibility of import restrictions by the U.S. Congress.

So much irony.


Irony for whom? I think free trade should be the norm.


Irony in the sense that this entire thread is dedicated to complaints about Chinese protectionism in the automotive sector through forced joint ventures, IP-sharing, and import tariffs when the NUMMI plant was built specifically as a joint venture between American and Japanese manufactures to share production techniques with American companies and skirt or head-off import tariffs.


I see. Quite astute.




Applications are open for YC Winter 2019

Guidelines | FAQ | Support | API | Security | Lists | Bookmarklet | Legal | Apply to YC | Contact

Search: