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.
> 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.
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.
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.
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.
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.
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.
"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".
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.
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.
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.
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..
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.
[+] [-] Animats|8 years ago|reply
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.
[+] [-] rconti|8 years ago|reply
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.
[+] [-] thisisit|8 years ago|reply
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.
[+] [-] chaolam|8 years ago|reply
[+] [-] unknown|8 years ago|reply
[deleted]
[+] [-] drewcon|8 years ago|reply
https://dailykanban.com/2017/12/go-production-hell-went-prod...
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.
[+] [-] obastani|8 years ago|reply
"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.
[+] [-] mmanfrin|8 years ago|reply
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.
[+] [-] crx087|8 years ago|reply
Production is coming along better than anyone realistic could have ever expected, and continues to do so at an impressive and steady rate.
[+] [-] FullyFunctional|8 years ago|reply
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.
[+] [-] tootie|8 years ago|reply
[+] [-] m3kw9|8 years ago|reply
[+] [-] danhak|8 years ago|reply
[+] [-] dkhenry|8 years ago|reply
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.
[+] [-] Cshelton|8 years ago|reply
[+] [-] slg|8 years ago|reply
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".
[+] [-] aidenn0|8 years ago|reply
[+] [-] selectout|8 years ago|reply
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.
[+] [-] _ph_|8 years ago|reply
[+] [-] dx034|8 years ago|reply
[+] [-] rweba|8 years ago|reply
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.
[+] [-] dx034|8 years ago|reply
[+] [-] ironchief|8 years ago|reply
TESLA TOTAL PRODUCTION BY QUARTER
Q32016: 25,185
Q42016: 24,882
Q12017: 25,418
Q22017: 25,708
Q32017: 25,336
Q42017: 24,565
Anyone else noticing a pattern here?
https://twitter.com/Tweetermeyer/status/948682235892264960
[+] [-] gozur88|8 years ago|reply
[+] [-] slg|8 years ago|reply
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.
[+] [-] simonsarris|8 years ago|reply
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.
[+] [-] flunhat|8 years ago|reply
[+] [-] r00fus|8 years ago|reply
Do you think they'll still be burning all this capital to build the 5k/wk ramp up a year from now?
[+] [-] hndamien|8 years ago|reply
[+] [-] vkuruthers|8 years ago|reply
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..
[+] [-] Robotbeat|8 years ago|reply
Tesla has been here before and worse.
[+] [-] PunchTornado|8 years ago|reply
market hype. market hype -> This thing is invaluable.
[+] [-] ebikelaw|8 years ago|reply
[+] [-] MBCook|8 years ago|reply
It seems like they should be much better at this by now. Maybe not GM or Toyota, but better.
[+] [-] melling|8 years ago|reply