Battery Cell Production Doesn’t Appear To Bottleneck Tesla Model 3 Output

JAN 14 2019 BY MARK KANE 30

Number of cells produced: over 500,000,000

According to the latest estimations by Electrek, Tesla Gigafactory already produced more than 600 million lithium-ion battery cells (21700 cylindrical type), which would store 11 GWh of energy.

This past summer Tesla said that production reached an annualized run rate of about 20 GWh, and Panasonic said in late 2018 that new lines will increase the production capacity to 35 GWh by the end of the year. Half of the year at 20 GWh (10 GWh) plus the previous period should put the Gigafactory already above 11 GWh.

As the 160,000+ Tesla Model 3 produced would – at 11 GWh – translate to an average of less than 69 kWh per car (excluding probably less than 1 GWh for energy storage systems), we need to note that regular production is probably running below current plant capacity.

The conclusion must be that at least for now, the battery production is not the bottleneck for Tesla Model 3 production.

…which prompts another question. What is the current bottleneck that prevents Tesla from exceeding 5,000 Model 3 per week and achieving 7,000 per week? The average rate for Q4 was below 650 Model 3 per day (below 4,700 per week), which requires less than 20 GWh of batteries per year.

The Tesla Gigafactory produces:

Other facts:

  • 5.4 million square feet of space on 3,200 acres
  • Over 7,000 Tesla employees and growing quickly
  • More than 17,000 construction jobs created since 2015

Source: Electrek

Categories: Tesla

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30 Comments on "Battery Cell Production Doesn’t Appear To Bottleneck Tesla Model 3 Output"

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Maybe they want to move the Model S and X to 2070s as well. With a mix of LR and SR 3s at 75kWh average and 5k per week production, we get to roughly 20 GWh per year. Add 100k S and X per year at 100 kWh and we are at 30 GWh.

Usually a plat doesn’t run at 100%, since that’s almost impossible and if we add in a few GWh for storage, we have the 35 GWh installed.

Tesla have said the bottleneck in production is fluid. Currently it should be body assembly at Fremont.

I think it is the paint shop. They have to add more efficiency to changing the paint. Their paint price is so expensive.

Paint shop is limited by emissions permit. Sort of a hard stop there.

Supposedly, they’re best in class clean.

Cells are almost never the bottleneck. They might have been for a couple weeks during Q3 after Tesla production suddenly jumped from 2000/week to 4000+, catching Panasonic off guard.

I think 7000 is combined Tesla and Panasonic headcount. I don’t know how many are Tesla employees, but I’d guess more than half.

Could be Mega Power Packs. Power Packs, that are in process but not complete for installation. I believe Tesla has committments in California. Colorado, Puerto Rico, Greece, and Australia. When Tesla releases it’s 4th quarter earnings results a clearer picture will emerge.

People have reported ordering a powerwall over a year ago and they’re still waiting…

Indeed, which is surprising because the Powerall is $6700 for 13.5 kWh (plus inverter and enclosure). It seems like the Powerwall should be a high margin item for Tesla and therefore they would fulfill those orders.

Energy storage had negative gross margins through Q3. They thought they could get above breakeven in Q4. That’s just gross margin, does not include overhead costs like sales and support, etc.

Right. If battery cells are not a bottleneck for TM3 production, then at least it seems Gigafactory 1 isn’t producing much over what Tesla currently needs. If it was, then it seems that Tesla should be delivering a lot more PowerWalls and PowerPacks than they currently are.

Now, I can’t be sure this is true; there may be some other bottleneck in PowerWall production. But Panasonic said, not that many months ago, that it had had a hard time keeping up with Tesla’s demand, and at that time had only recently increased production to the point that there was a comfortable margin.

Based on various statements by Panasonic and Tesla spokesmen over the years, I think a bottleneck in cell production has been an on again/off again thing ever since Tesla started making the Model S in 2012.

An enormous amount is going to Puerto Rico and Australia. Hope the new lines are pumping them out.

I suspect it’s demand that’s keeping production at ~5k/week. Tesla currently only offers relatively high priced models and the market will only absorb so many of those so Tesla has to pull demand levers. The first I think was the unexpected medium range model, the next is expanding the market to Europe and China. At some point lease deals and the SR version will trigger new demand, maybe enough to move things beyond that 5K/week. Combined with overseas production (China) that 500K/year target might yet turn out to be feasible.

I do think for the really big numbers Model 3 needs to become more affordable than it has been so far.

I suspect production has been 6k per week for at least a month or two based on what I have heard (3rd hand). However, I agree demand in the US is likely saturated around 4k per week or maybe 5k for current pricing. With 3k per week going overseas now (already started shipping) they have no issue with demand. I suspect cheaper models or options come out as worldwide demand is saturated somewhat, maybe in June or July to make sure to increase their sales over prior year in the US.

4-5k per week? I’ll be surprised if Tesla sells more than 5k Model 3s in the US for the entire month of January.

It seems almost all production this month and into February is targeted for overseas. That’s the way they do S/X. They make US versions in the back half of the quarter. For almost a year they’ve said they’re going to smooth this out, but it’s hard to bite that bullet because it makes the numbers look bad.

Agreed, I expect US sales to fall of a cliff this quarter as production is shipped overseas only to rise to (hopefully) new highs as leasing and SR become available.

Automobile sales normally “fall off a cliff” in the first quarter of a year. Car sales are highly seasonal. So even if Tesla wasn’t sending much of its production overseas, we could still expect domestic Model 3 sales to fall sharply as compared to Q4 2018… doubly so because of the reduction in the Federal tax credit.

61,394 Model 3s were produced in Q4 which works out at ~5K per week. That number was 15% increase versus Q3 so production seems actually to have been pretty stable around the 5K/week mark for a pretty long time as Tesla is moving instant cash (vs leasing) high end versions. The big question is if new demand levers can keep up with falling demand for these high end versions and maybe even expand things to the next level.

“I suspect it’s demand that’s keeping production at ~5k/week. Tesla currently only offers relatively high priced models and the market will only absorb so many of those so Tesla has to pull demand levers.”

But there are obvious demand levers for the Model 3 which Tesla could pull, but hasn’t:

1. Offering leases
2. Making the $5k Premium Upgrade Package optional, instead of mandatory as it currently is
3. Offering the lower-cost Standard Range battery pack

Now, of course, the obvious reason that Tesla isn’t using #3 is because they have not managed to reduce the unit cost for making the car enough to make that profitable. But I think we should look deeper than a single reason why Tesla has not yet making the lowest trim level of TM3. After all, if Tesla could boost production significantly, that would soon result in lower unit costs due to economy of scale.

(continued…)

Plus the even more obvious:

4. Open up for ordering in Europe and China already in October, and start shipping from early November.
5. Make the Mid Range an option for Europe and China as well.
6. Let alone the rest of the world.

There is a megaton of demand for Model 3 out there – it will likely take several years before they have enough capacity to meet that demand.

No, it will take several more years to meet the CURRENT demand.
I suspect that Demand will go up as supply increases.

(…continued)

Looking at the big picture, I think it’s more accurate to say that Tesla is managing demand by pulling, or not pulling, various demand levers. And perhaps the reason they aren’t pulling some of those levers has more to do with a production bottleneck somewhere (such as assembly at the Fremont plant being maxed out) than it has to do with profit margins.

Hopefully it’s clear that much of what I’ve said here is mere speculation, altho hopefully at least somewhat informed speculation.

If they have extra cell production (I don’t think this has happened yet) they can always design a replacement Leaf pack, they could almost certainly sell one to every Leaf owner. An active cooling system would be required but that should be pretty simple.

Even if Tesla actually wanted to sell a 3rd party replacement for Leaf packs — which it doesn’t — trying to retrofit a liquid cooling system into the Leaf battery pack would be difficult, very costly, and probably wouldn’t work well since the car wasn’t designed for it.

Tesla has a waiting list in a market for excess battery cells: PowerWalls and PowerPacks. Just why that market isn’t being supplied is IMHO an open question. I see one comment above claims it’s because PowerWalls are not profitable. Well if so, then why doesn’t Tesla simply raise prices to the level appropriate for supply and demand? I could of course be wrong, but the very long waiting list for PowerWalls suggests a lack of cell supply to me. If it was some other production bottleneck, such as the major bottleneck Tesla had with assembling Model 3 battery packs, then that should have been solved by now.

Didnt Elon say 10K per week by now?

Elon have said many things….

Yeah, but he also envisioned touchless high-speed auto assembly lines with robots assembling parts at eye-blurring speed.

Reality has set in since then. That expectation being brought down to earth has the same cause as production at the Fremont assembly plant apparently maxing out at around 7k per week, or perhaps even less.

“What is the current bottleneck that prevents Tesla from exceeding 5,000 Model 3 per week and achieving 7,000 per week?”

My current theory (I’ll call it a “theory”, rather than a mere hypothesis, since I think there is some evidence to support it) is that the Fremont assembly plant is about maxed out as far as space goes. As evidence, I offer the fact that Tesla put partial assembly lines under tents in the parking lot. They wouldn’t have done that if they had sufficient floor space inside. There also has to be a limit on how many trucks they can have delivering parts to the factory on a daily basis; I understand Tesla has already had to install more loading docks at the Fremont factory.

But Nix has argued that the Fremont plant was and/or is undergoing a major expansion, and that production can continue to grow substantially. Well, I hesitate to argue with Nix; he’s nearly always right. I expect details will slowly emerge about why Tesla didn’t sell more Model 3’s in Q4 2018 than they did in Q3 2018.

“Battery Cell Production Doesn’t Appear To Bottleneck Tesla Model 3 Output” … Really? To me, that’s exactly what it appears to do, as you state the capacity of 20 GWh/y i H2-2018 was just enough to supply 160.000 Model 3 in 2018. Take a look at this graph: https://www.dropbox.com/s/8zq2x9gzwyd4qt4/Bloomberg%20Model%203%20Production%201-12-19.jpg?dl=0 It’s not accurate, but clear enough to illustrate the situation. The green line show the first half of a perfect S curve on its way to 8-10k per week, but dramatically interrupted around the number of 4.5k per week. Given the fact that the Mid Range wasn’t in production until well into Q4, and they use 2170 cells for Powerwalls as well, that constrain pretty exactly corrosponds to the supply of 20 GWh. That’s a bottleneck! As soon as the three new Panasonic lines are comissioned (should’ve been by end 2018, but seems not yet), adding another 15 GWh of capacity, you will likely see the green line continue its steep heading to 8-10k per week. Unless of course other bottlenecks are looming elsewhere in the supply chain …. but that would surprice me, as the actual bottleneck has given all suppliers plenty of time to prepare sufficient capacity, after Q3… Read more »

Hmmm.
We will find out in a couple of weeks when it is is announced about sales.
I suspect that Tesla is making 20,000+ / month just for America and the increase is now going to Europe.
Down the road, hopefully, they start getting knock down kits.

For long some think that Tesla just needs to build cars at any price that someone will buy them. That is obviously no true.
I don’t know the reason why Tesla is not making 7000 model 3 per week, but maybe there’s not enough buyers for that amount of cars.