Can Tesla Meet Model 3 Demand?

2 years ago by Steven Loveday 73

Tesla Model 3

Tesla Model 3

Tesla took over 325,000 deposits for its Model 3 in a matter of days. Being that the company just finished selling ~50,000 vehicles in 2015, and some 14,820 during the first quarter of 2016, the big questions is, “can they really pull this off?”

Tesla Model 3 Signature Glass

Tesla Model 3 Signature Glass

Elon Musk’s big picture plan is to build and sell 500,000 vehicles a year by 2020. His estimate is for about 80% of these to be Model 3.

This will take a monumental production boost at the factory in Fremont. The company is already behind its 2016 Q1 targets for the Model X, and the Model 3 won’t even begin to be in production until late 2017.

Tesla’s Fremont factory surely has the capability, and has proven itself in the past. The facility was previously home to a GM/Toyota joint venture called New United Motor Manufacturing Inc. (NUMMI). The facility pulled off ~500,000 units comprised of Geo Prizms, Pontiac Vibes, and Toyota Tacomas.

There has been no specific comment from Tesla as to its plans to jump production from 80,000 units this year to 500,000 units in 2020. There’s no doubt that many new workers will have to be hired and trained quickly. Reports and speculations point to robots.

At Nissan’s Sunderland factory in the UK, it took 28 years for the site to hit a production level of 500,000 units annually.

Tesla can’t really afford to fail on the production to the point that timeline promises are drastically stretched out. As the EV market grows and sales rise, the company will be constantly be faced with the competition of products from established automakers. Automakers that are supported by years of brand loyalty and service, vast networks of dealerships, and abundant capital.

Tesla hasn’t had such pressure in the past, as this extreme number of reservations was surely unexpected. The heat is on now and only time will answer all of the questions.

Source: Autocar

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73 responses to "Can Tesla Meet Model 3 Demand?"

  1. Mark C says:

    I certainly hope they make the half million annual production goal by 2020. That would mean even I would likely have my new Model 3 by late 2018.

    They WILL meet demand, but watching the ramp-up as a reservation holder may be excruciating.

    1. LEAF_n_PiP says:

      Especially those hoping for a chance at getting a federal tax credit for the Model 3.

    2. Aaron says:

      My 2015 LEAF will hold me off until Tesla builds my Model S sometime in 2020 or so. I’m in no rush. Just gives me more time to save up.

      1. Kdawg says:

        Did you mean Model 3, or are you buying a Model S in 2020?

    3. jerryd says:

      Tesla is the only one that has everything needed to ramp up.
      Fact is there is no extra supply with batteries.
      If you want large quantities, you have to make new material, refineries and factories to make them.
      So you have to order the batteries you think you’ll need 2 yrs in advance.
      GM for instance might not be able to make more than 30k/yr if they haven’t ordered extra battery production.
      And Musk warned them about 2 yrs ago and everyone said not going to prebuild
      plants.
      Yet Musk has everything lined up for 5 yrs to do his goals.
      And has started the planning for Euro, Asian factories to go beyond that.
      So he can do it and others are yrs behind in filling the demand for compelling EVs.
      And the T3 shows in ways they can’t ignore, the demand for good well designed as EVs is there.

      1. Maria Essex says:

        In time fully electric vehicles may provide extended milage permitting normal transportation.

      2. EVA-01 says:

        Elon Musk certainly has the vision. It’s too bad Tesla doesn’t have the capital like the established players do. If it did, Elon would certainly be able to produce EVs of different sizes/forms and build more manufacturing plants.

    4. deborah crazy train flower power says:

      I believe they will …

  2. Alaa says:

    100% YES.

  3. Moose says:

    Isn’t the 500,000 units per year 2020 and the long waiting lines for M3 different issues?

    The first one they will have to deal with, no matter what, if they intend to follow through with their master plan. How can the second one be an issue? If they intend to shift 500,000 units 2020 they have to come from somewhere. I see the 300k+ reserevation just as an validation that they are on track for 2020. And they can handle the waiting line somewhat outside production by, for example, introduce model Y. This will shift a lot of the reservation to a model that probalby wont debut until early 2019. And they can avoid hatchgate while at it if they want :).

    And if they facelift and boost model S the will shift some more reservations.

  4. Tim says:

    All this assumes they will only have a single manufacturing plant. We already know they’re looking for Europe and China plants.

    1. Rebel44 says:

      They are more than looking – there are open negotiations about several viable sites in EU.

      1. Nathanael says:

        Apparently Tesla’s now got their “Joint Venture” set up in China (this is required for a carmaker to manufacture in China — why don’t we have that sort of protectionism here in the US?!?). They’ve probably got a factory site lined up in China too.

        My question, then, is where factory #s 4 and 5 are going to be. I think east coast US (or possibly Ontario) for #4. But maybe Australia for #5?

  5. 2013VOLT says:

    GM should abandon the Bolt and license the production capacity to Tesla for the Model 3.

    1. evcarnut says:

      No! GM will mess them up! Let GM mess up their own product!

      1. scott franco (No M3 FAUX GRILL!) says:

        Ditto. This is like Rembrant farming out his work to Thomas Kinkade (sorry Kinkade fans).

        1. Assaf says:

          I don’t know what y’all are smoking.

          We need the US and Japan Big Three to start switching from making ICE to making EVs. GM and Nissan are far ahead of the rest, and they must continue pulling ahead.

          Besides, as a customer why would one want a single-source maker with different brand name slapped on? Let there be multiple makers of 200-mile EVs ASAP. It’s a win-win.

          Last but not least, engineering and manufacturing-wise, GM hasn’t messed up the Volt in either Gen, or the Spark EV. So while their ICE quality leaves a lot to be desired, on EVs they’ve been making amends rather nicely.

    2. Speculawyer says:

      That would be awesome but not gonna happen.

    3. QC says:

      They should buy one of the European abandoned car factories (for example in Gent, Belgium). The more they robotize the less the local unions/salary levels is a problem

      1. Nathanael says:

        They’ve already automated huge portions of the factory; far more of Model S production is automated than when the first cars were produced, including all kinds of little things like grease injection into the motor and the attachment of the battery with bolts.

        The only bits which probably still require heavy human intervention are:

        (1) Interior trim. I doubt the attachment of the interior trim is automated.

        (2) Wire runs. If these are done conventionally, they can’t be automated. I hope Tesla has come up with an innovative way to automate these (I can think of at least one possible way to do it). If they have, it’ll massively improve their cost structure.

  6. HVACman says:

    I have a question for any bankers out there. How much money can Tesla borrow from commercial banks to expand their production facilities, based on the strength of $327 million worth of refundable non-binding pre-order reservations? What is the reliable “value” of the reservations going forward to 2018?

    1. scott franco (No M3 FAUX GRILL!) says:

      It helps boost their cash on hand, which was getting fairly low.

    2. Nathanael says:

      Bankers are WEIRD so this is unpredictable.

      But based on a situation I encountered in a different industry regarding borrowing against customers’ refundable deposits, I’d guess:

      Borrow against 80% of the expected revenue stream (minus deposits already provided) (maybe less)

      Interest rate 2 or 3 percentage points above prime (maybe more)

      With 325K reservations this would be, conservatively, $8.8 billion in borrowing capacity. I bet the banks will be shy and will offer less than that.

  7. Speculawyer says:

    Who knows? As a person with a M3 reservation, I sure hope so.

    Some positives:
    -That NUMMI factory has made 500,000 cars/year in the past
    -The paint shop is now set up for 500,000/year now.
    -Battery pack manufacturing will be moved out of the Fremont factory to the Gigafactory
    -There are probably lots of experienced auto manufacturing people out there that they can hire.
    -They have probably been humbled by the Model X door debacle such that they will take the KISS principle to heart.
    -Should have no problem raising needed capital.

    Negatives:
    -They really lack experience
    -They haven’t built with steel yet (S & X are aluminum)
    -That price target is pretty low
    -There is a LOT to be done to set up the factory for the Model 3 (They don’t even have the Model X running smoothly yet.)
    -They are going to be watched like a hawk by all of the analysts (maybe that is a positive?) who will criticize their every misstep.

    1. Kdawg says:

      “-There are probably lots of experienced auto manufacturing people out there that they can hire.”
      ———-
      Actually they already have, years ago, that’s how they got as far along as they are today. A lot of the work for their plants is actually done in Detroit, as much as Tesla keeps that info quiet.

      1. Speculawyer says:

        Awesome! I’m glad to hear it. They really should try to get a lot of work done up in detroit where there are a lot of very important experienced people and people can buy nice homes for a low price. The more work they can get done in the midwest, the better!

      2. jerryd says:

        Yes Tesla bought a Tool and die maker that makes car plant production equipment a few yrs back.
        Spec, nice post.

      3. Nathanael says:

        Well, a lot of the work is done in *Michigan*. I’m not aware of any of Tesla’s work literally being done in Detroit.

        Tesla Tool and Die is in Grand Rapids.

  8. scott franco (the evil republican EV owner) says:

    In my youth (yes, I had one), I read a book on the history of Volkswagen.
    When the british were tasked with restarting the VW factory, it was bombed out.
    There were gaping holes in the roof, there was standing water in many places on
    the factory floor. Despite that, the workers managed to assemble a few VWs
    as demos, and then restarted a modest production schedule.

    The years that followed showed what happened after that:

    Car production

    1945 1,785

    1946 10,020

    1947 8,987 (apparently due to metal shortages. First year of exports)

    1948 19,244

    1949 46,154

    1959 90,038

    1951 105,712

    1952 136,013

    1953 179,740

    1954 242,373

    1955 329,893

    In 1958 they broke 1/2 million in one year.

    By 1962 they broke 1 million in one year.

    What became known as the “german miracle” shows what can be done.

    1. Kdawg says:

      But how many other car companies came & went in that time? The odds are really stacked against you, but Tesla is making it… so far. I hope they can keep it up, to where they are actually making 1 million vehicles/year.

      1. scott franco (No M3 FAUX GRILL!) says:

        A far more apt parallel than you would think (Tesla and VW). It was the 1950’s/early 1960’s. VW came to america and advertised a small, cheap car that saved both gas and money.

        It was universally panned at the time. It was called an ugly, impractical car. Americans wanted bigger cars with more features, and didn’t care about gas usage. After all, gas sold for less than a dollar a gallon and stations were giving away free dishware to help move the stuff.

        VW set off a small car revolution that exists to this day.

        1. Phr≡d says:

          10cents/gal, though technically correct, lol

    2. Speculawyer says:

      Well, VW could sure use some “German miracle” today. They need to fix their dieselgate debacle.

  9. carcus says:

    If Tesla can get #300,000 Model 3 out the door by the end of 2020 — that would be an outstanding accomplishment.

    I’m hopeful, .. but not gonna hold my breath.

    1. scott franco (No M3 FAUX GRILL!) says:

      I’ll bet you $1000 they can.

  10. Someone out there says:

    Part of making it cheaper is to simplify the production. The cost of making it is partly dependent on how much effort it takes to produce it.

    1. Speculawyer says:

      Yep, and the effort to produce it will be heavily dependent on the design. So I hope they are “designing for ease of manufacture”. Use fewer parts, get rid of unneeded features or make them options, cheaper parts for base model with lots of better available options (wheels, seats, etc.).

  11. scott franco (No M3 FAUX GRILL!) says:

    Stop me if you heard this one.

    One day, the farm animals of Autofarm had a meeting and talked about the fact that farmer Bama had a birthday coming up. The group decided that it would be appropriate if they could serve farmer Bama a good breakfast on that day. The chickens, led by Gmotors chimed in that they could make eggs for farmer Bama. Then, Gmotors told the pigs, led by Tess, that they could provide the bacon.

    Tess answered, wait for it, “The problem with that suggestion is that, while you are involved, we are COMMITTED!”.

    Which is why Tesla will beat GM. They are committed.

  12. liberty says:

    Here is my guestimate. S and X are fine to go from 50,000 in 2015 to `100,000 in 2020.

    For the 3 to go to 400,000 you need production of 175K in 2018, 270K in 2019 and 400K in 2020, given a little over 50% growth each year as tesla has done so far.

    I don’t think it will happen, but they will get closer than I thought a year ago.

  13. Speculawyer says:

    Assuming that Tesla miraculously hits the $35K target base price AND Tesla cranks up manufacturing so they can crank out 500,000 cars from the Fremont factory.

    Do you think Tesla will get 500,000 cars of demand per year for the Model 3?

    I think it is possible but a few things have to happen:
    1) Have to hit $35K base price.
    2) Have to expand the Supercharger network a bit more to cover uncovered areas and to more heavily cover seriously traveled routes.
    3) Consumer education has to happen. Consumers have to realize that a 215 mile range EV with fast-charge ability really will cover pretty much all their driving needs.

    1. Assaf says:

      ummm…. in reality, a 100-mile EV with good QC-network coverage would meet pretty much all driving needs of most people…

      …but don’t tell anyone 🙂

      1. pk says:

        As long as that 100 miles is a true 100 miles and not a 55 miles if I got the heater on going 75 on the highway. (Can you guess which EV I drive :-p

        1. Murrysville EV says:

          Leaf.

          My 2012 Leaf numbers were:

          73 miles EPA
          50 miles summer (actual)
          36 miles winter (actual, worst case)

          This made it very hard to answer that #1 EV question: “what’s it’s range?”

          1. Assaf says:

            @pk agreed. I mean solid 100 miles. Maybe down to 90 miles under extreme duress.

            @both of you: it’s first-gen pains. Unless you sell to the richest 5% who can afford pretty much any cost, you’ll have to compromise if you don’t want to lose your a$$ while developing the technology.

            We’ve got a Leaf too. In fact our 2nd Leaf lease, we’re likely to do a 3rd one if their Gen 2 comes out soon enough.

            1. pk says:

              I’d consider a gen 2 Leaf if it had active thermal management of the batteries and a competitive range. (while I wait for my model ≡ )

            2. Nathanael says:

              This is of course *why* Tesla had to start by producing an ultra-high-end car. Sales the car to the rich are what fund the R&D.

              This was the business model of every single car company in the late 19th / early 20th century before the Ford Model T. It is the *only* business model which has ever been successful for a car company…

              (Except for Volkswagen, which was funded by Hitler. So I suppose that’s the alternative business model, be funded by a totalitarian mass-murdering dictator.)

              Anyway it was pretty obvious why Tesla used this business model.

          2. Nathanael says:

            For reference, my Model S (85), in upstate NY:
            265 miles EPA rating
            265 miles summer, actual
            176 miles winter, worst-case (<-10F), actual

            Since I normally drive no more than 120 miles, this is fine. This is why this is the car I got; it was the first one which met my needs.

    2. Brian Rose says:

      Let’s say that Tesla doesn’t get a single new reservation going forward. Basically, let’s be extremely conservative and brain storm what happens when Model 3 #325,000 roles off the line in ~3-4 years:

      There will be 325,000 middle-class people showing friends, co-workers, and family their Model 3.

      Over the next few days just ask random people at the grocery store, at work, in the parking lot, wherever, if they know what Tesla is. You’ll be surprised how many still don’t know Tesla even exists, and most of those that have HEARD of it will reveal the extent of their knowledge is “Tesla” “electric car”.

      My mom and step dad have a friend with a Model S. They’ve driven it. It is the only reason they know anything, at all, about Tesla. Even though they’ve driven a Model S (they instantly fell in love) they know NOTHING about super chargers, battery degradation (or lack thereof), over-the-air updates, Tesla’s self-learning auto-pilot, etc.

      95% of people still have no clue about Tesla. In a few years there will be 325,000 middle class people who won’t shut up about their Model 3, and their friends, neighbors, co-workers, and family will experience first-hand the numerous features that a Tesla has that no other vehicle can offer.

      The base MSRP of my Volt was $34,999. It is vastly less capable than a base Model 3 in every regard, yet it is still the best vehicle I have ever owned.

      I also wondered where that kind of demand would come from every year going forward. I assumed every acquaintance I have would at least be AWARE that Tesla’s Model 3 is a thing because of newspapers and media mentioning it after the reveal and reservation numbers.

      It was a wake-up call for me when not a single person at my work – NOT A SINGLE PERSON – had any idea whatsoever about Tesla, the Model S/X/ or 3, the reservations, Elon Musk, NOTHING.

      There is A LOT of potential for growth through awareness alone. I’d say 80% of people don’t know what Tesla even is, and 15% of people know only that “Tesla makes electric cars” and nothing else.

      In discussing it with co-workers every single one was concerned about battery degradation, charging, and EVs generally being a novelty. They were skeptical that super chargers are even a thing that exists when I told them, didn’t believe how MANY their are, OR how quickly they charge the battery.

      The general idea I got to their skepticism about reality itself was “If this is all true I would have heard about it”

      1. Doggydogworld says:

        Your Volt is vastly superior to the Model 3 in at least one regard…..

      2. Nathanael says:

        You are absolutely correct, Brian. It’s amazing how many people don’t know about Tesla at all. Every time I show someone my Model S, it’s word-of-mouth marketing.

        Even though I currently tell people not to buy it because there’s no upstate NY service center. 😛

  14. Murrysville EV says:

    If 80% of 2020 Teslas are Model 3s, then approximately 15-20% of 2020 Teslas will be Model S – nearly 100k units.

    The Model S will be 7 years old by then. It’s hard to believe sales will double on a vehicle design that is so ancient by then.

    Tesla needs to be investing some resources in Model S refreshing, but especially in replacement of it.

    1. Brian Rose says:

      There were reports of Model S production being down to re-tooling the last 2 weeks.

      The new firmware update was discovered to contain code that names a 100kWh battery.

      The (much newer) Model X and 3 both have no grill, but the Model S does have a grill.

      There is a 100% chance that the Model S is about to get a significant update very soon. This quarter (Q2 2016) for sure.

    2. Maria Essex says:

      I have watched and kept up with how vehicles become so advanced in time, They practically drive themselves. There are members of my family that suffer with handicaps and have struggled there entire life to get around.
      With all this technology that they would come up with a model that would accommodate the blind by using brail controls.

      Brail and/or voice control would allow the visually and physically impaired to use vehicles for independent transportation.

    3. Nathanael says:

      How often did Henry Ford “refresh” the Model T?

      (Yes, I know, he actually did so several times.)

      Anyway, my point is that the Model S will continue to sell like hotcakes with no design changes.

      There *will* be design changes soon, but they will be a matter of “backporting” lessons learned from Model X and Model 3. Don’t expect anything major.

  15. Mxs says:

    They will either make it or it will simply break them. Big test, looks like pretty large piece to chew on. Let’s hope that they will make it.

    I think it’s pretty obvious and nobody should argue with the fact that should they in anyway not either deliver the quality people expect or in time frame they put themselves against the model 3 will bankrupt them. There are pass the point of return. This is it.

    I know TesaMundo would suggest it would not be a big deal …. What really is ever a big deal for him, right? Tesla’s glass is always 3/4 half …

    1. Josh says:

      I agree, but Roadster, Model S, and Model X were make or break projects for Tesla also.

      It seems to be the norm at Tesla.

  16. Michael Wall says:

    My very optimistic opinion is that, since this has been their goal and plan from the beginning, they will actually be even way ahead of schedule on the Model 3. The S and X were the ankle weights, the 3 and Y pick up are the easier and simpler copies. In other words, they’ve already been preparing the way for years so I think they could even beat the Bolt out the door.

    1. Brian Rose says:

      Yes, exactly.

      They actually started working on the Model 3 at the same time they started the Model X.

      The design, motor, chassis, and manufacturing are far further along than many realize.

      The Model 3 is built from the ground up for ease of manufacturing. That is THE axiom behind the Model 3. From day 1 the objective was a vehicle that is easily scaled both in terms of parts availability AND ease of assembly.

      Tesla is looking to built assembly lines in Europe and China BECAUSE the Model 3 will be so easy to built and scale.

      The Model S and X were specifically built with challenging engineering and specialty parts. It made them a unique, luxury product. The fact that they’re difficult to manufacture and source parts for is mostly intentional.

      People connect the dots from the Roadster to the S and the X and say “the Model 3 will be no different”. With no other information that seems reasonable.

      If they dug a little deeper they’d see that Tesla’s previous vehicles all experienced scaling problems because they were luxury products with unique, challenging specs as their central feature.

      The Model 3’s central feature is scalability and ease of production, AND the unfinished parts of the design were intentionally left unfinished to know demand before settling on design. The extreme demand will guarantee a final design choice that maximizes scalability at the expense of unique features.

  17. arne-nl says:

    “Tesla hasn’t had such pressure in the past,”

    History is forgotten too soon. With the Model S they had to start up mass manufacturing. At that time the only thing they did previously was outfitting gliders shipped in directly from the UK with an electric drivetrain. Model S production was a totally new trick to learn. And they did it.

    This task is much easier. It is just more of the same. They will do it. They have the expertise and getting the cash is easy with 350,000 reservations. Nothing more is required.

    1. Nathanael says:

      Raw materials sourcing for batteries is going to be an essentially new problem.

      Tesla was just letting Panasonic handle this before, and Panasonic was basically able to buy in the open market.

      Now in order to scale up, Tesla has to line up lithium and cobalt supplies which are large percentages of *total world production*, and they’ve promised to source them in North America. This is a new problem which involves getting financing for mining companies!

  18. Robert Utess says:

    I see Tesla buying a old plant in Detroit for M3 production for exchange of being allowed to sell cars in the state.

    1. Josh says:

      The next US plant for Tesla will be a truck plant in Texas, along with the same horse trading you mentioned.

      Next car plants will be EU and China.

  19. DTM says:

    European automotive is soaring last years. Tesla should take a Look at the overtaking/ hiring Fiat facilities in Italy to ramp up production

  20. Dr. Steelgood says:

    Sutherland is in Australia – there ie only a Nissan Service. They mean Sunderland, UK, where there is the Nissan factory.

  21. German says:

    After nearly 2 years of construction they have about 14% online, according to this recent report:

    The batteries will allways be the bottleneck, which can´t be solved in short time.
    Expect about 60.000 M3 in 2018, maybe 175.000 in 2019. If you think it will be more, have a close look at the current progress of the gigafactory.

    1. Nathanael says:

      Linear projection is stupid.

      The Gigafactory is designed to be constructed in a modular fashion. They’re currently testing different prototype production lines. Once they get one they’re happy with, they can scale it up massively, very quickly.

      The hard part for Tesla is then going to be sourcing the raw materials. They’re working on that too, but I haven’t heard much about it lately. I suspect the car production will be determined by the lithium, nickel, and cobalt supply!

  22. Bavarian says:

    The capacity of the gigafactory will be the main bottleneck for the next years. According to a recent report, only 14% are currently online after 2 years of construction:

    If you want to know how many cars can roughly be produced, you only have to look at the progress of the gigafactory.

  23. Larry4pyro says:

    Did 325,000 people actually deposit $1,000 to reserve a Model 3 or was this number bloated by Tesla Motors share holders looking to increase the value of their shares by placing multiple reservations? Tesla shares jumped by about 40% after the numbers were announced.

    1. Gerhard Hauer says:

      95% ordered 1
      5% ordered 2

      So it does not look like massive bloating.

      1. Bonaire says:

        If I order 1 and my wife orders 1, did I order 2?

        Someone should review the count of orders using the address as the key to the aggregation.

        If a fleet owner wanted 100 – how does he order that?

  24. karlos says:

    the appeal is fairly obvious as the product so far speaks for itself. fairly plausible that those numbers are very real. how many tesla newbies will have the patience to wait years for a car they’ve put down a deposit on is another story. those already familiar with the company know they’ll come through – others will definitely lose patience and loudly huff about it – and that’ll make the markets news which are always anxious to throw any and all negativity toward tesla into the spotlight.

  25. GMAN says:

    Well audi is doing an A3 electric.. 200 mile range. Soon all the manufctuers will be building EVs and they have the factories and tremendous experince changing over factories for new body styles.. New features and different cars…if you take any big three assy plant..like belvidere assy.. They could produce 500k model 3 per yr in 6 months from right now.,and if tesla cant get going audi benz fiat chrysler ford gn and otheres will catch up and have service dealers just up the road and absolutly crush tesla and its stock.so they better get FAST THOSE 400k oders need to be filled by sept 2018 and thats slower than any other manufactuer can do it by a mile..