Tesla Model 3 Production To Start In China By End Of Year

JAN 31 2019 BY MARK KANE 60

From empty plot to production within one year

Tesla has said in its fourth quarter report that the local production of Model 3 in China should begin by the end of 2019, which sounds great taking into consideration that there is no plant built yet (not even a heavy duty tent).

The Tesla Gigafactory 3 in Shanghai will produce (probably in 2020) some 3,000 Model 3 per week. Those will be only base versions of the Model 3, as the top versions (all-wheel drive and Performance) will be supplied to China from the U.S.

Tesla underlines how important it is to produce the base version in China to achieve profitability.

“…by the end of this year we are expecting to start producing Model 3 vehicles at our Gigafactory Shanghai using a complete vehicle production line. We expect the capital spend per unit of capacity for this factory to be less than half of that of our Model 3 line in Fremont.”

“Local manufacturing is an essential component of our ability to provide to customers in the region a truly affordable version of Model 3. Most other mid-sized premium sedans in China are locally produced, which allows them to have a lower average selling price. In the initial phase of Gigafactory Shanghai, we expect to have stamping, paint shop, body joining, and general assembly shops in operation by the end of 2019. This accelerated timeframe should be possible due to the radical simplification of our manufacturing layout and processes compared to our first-generation production line in Fremont. Higher-spec models such as our long-range all-wheel drive (AWD) and Performance versions will continue to be shipped to China from the US.”

We would add that uncertainty about the high import taxes factors in too.

The rate of production of Model 3 in Fremont is to be 7,000 per week later in 2019, which together with 3,000 per month in China, should enable Tesla to crank 10,000 per week at some point in the future (in 2020 we guess).

“Model 3’s production rate progressively improved through Q4, with December 2018 being our highest volume month ever. In our Fremont facility, we are now past the steep portion of the production S-curve, and we expect our production rate to continue to gradually improve. Every part of the Model 3 production process has demonstrated over a 24-hour period the ability to produce at an extrapolated rate of 7,000 vehicles per week. By the end of this year, we expect to be able to produce Model 3 at this rate on a sustained basis.”

“Model 3 production volumes in Fremont should gradually continue to grow throughout 2019 and reach a sustained rate of 7,000 units per week by the end of the year. We are planning to continue to produce Model 3 vehicles at maximum production rates throughout 2019. Inclusive of Gigafactory Shanghai, where we are initially aiming for 3,000 Model 3 vehicles per week, our goal is to be able to produce 10,000 vehicles per week on a sustained basis. Barring unexpected challenges with Gigafactory Shanghai, we are targeting annualized Model 3 output in excess of 500,000 units sometime between Q4 of 2019 and Q2 of 2020.”

Tesla Gigafactory 3 facts:

  • location: Shanghai, China
  • wholly-owned subsidiary (not joint venture)
  • construction was started in January 2019
  • initial construction should be completed by the end of summer
  • production of cars should start in second-half of 2019 (volume production from 2020)
  • expected total investment: about $2 billion
  • purpose: production of affordable versions of Model 3/Model Y for greater China region (higher cost versions of 3/Y and all S/X to be produced in the U.S.)
  • battery packs will be assembled using lithium-ion cells from various suppliers, including Panasonic
  • expected volume: 500,000 per year

Categories: China, Tesla

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60 Comments on "Tesla Model 3 Production To Start In China By End Of Year"

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At what cost? Exploiting Chinese builders…

Ever been to China?

no. Far more likely he is in Russia.

‘Exploiting Chinese builders…’?????
What is your idea of exploiting?
And do you work for the Russians or something?

Are you being sarcastic?

I’m sure there are hundreds of millions of Chinese workers would be very happy to be “exploited” by working for Tesla and other high-profile, cutting edge green tech companies.

I’m always sarcastic…

Yeah, having a job vice being unemployed is a terrible thing.

If you’re an American, you really need to go out and see the world.
I hate to say this, but there is a reason someone’s slogan is to “Make America Great again”

This really applies to anyone. Europe maybe has more variation in a small area, but people in general should travel some to see how others live. To say this applies only to people in US is unfair.

China is a huge market, this will be very important for Tesla. I doubt they’ll be making many cars in one year, but in one year and half seems perfectly fine.

There is hundreds of carmakers in China, more than 100 EV makers alone. It’s almost as if stamping out a new plant isn’t such a big deal over there, especially if it’s a familiar drill for the investor as underscored by the fact that Tesla expects only half the capex of the Freemont plant for this new plant.

“The Shanghai factory is a swampland with a fence as of Feb 1, 2019 local time”, that’s just a lie. From a January 2017 article on this site:

“From the video, it shows that construction already started and good numbers of heavy equipment are operating on the site”.

And the article above further quotes Tesla and Musk;

“The rate of production of Model 3 in Fremont is to be 7,000 per week later in 2019”

Will it? Is demand even there for 7k/week?

Two points about this:

– Remember when the very same Elon Musk had “ZERO DOUBT” in 2017 that they could easily make 10,000 per week by the end of 2018 in Fremont?

– Remember that their latest shareholder letter (Jan 30, 2019) only forecasts 360k to 400k cars (INCLUDING Model S AND X!) for all of CY 2019.
So where’s the growth all year long when Model3 ALONE is supposed to be produced at 7k per week?
Where’ s the ramp in CY2019 that was supposed to be easily achievable months ago? Remember all the “burst production” claims?

Tesla already made around 87k cars in Q4 2018, which equals to little or no growth for all of CY2019 (USING THEIR OWN GUIDANCE, I’m just quoting Tesla’s numbers):

87k x 4 = low end of Tesla’s guidance for CY2019.

The “hyper”-growth story is gone.

Or Tesla is low balling guidance, to avoid any chance of disappointing investors.

Maybe we’ll see them up the guidance by 70K when they reach 210K deliveries between Q1 and Q2.

Read that shareholder letter a bit better, it’s not going to be 7K/week right off the bat but gradual growth with sustained 7K/week by the end of the year. Makes sense, Tesla first needs to get down cost so it can actually sell that sort of numbers by offering the SR version.

..and remember what the man said: “Elon Musk is always late but nobody is able to keep up with him” as demonstrated by the fact that the production numbers you poo poo are completely and utterly unrivaled in the industry.

Chris, I read all their IR letters and other statements.

In fact, I read all of them very closely:

Jan 2, 2019: “We started the year [2018] with a delivery run rate of about 120,000 vehicles per year and ended it at more than 350,000 vehicles per year.”

Jan 30, 2019: “In total, we are expecting to deliver 360,000 to 400,000 vehicles in 2019.”

These are quotes from Tesla’s IR communication.

Where’s the growth?

And why does it take Tesla months to scale from 5k to 7k/week when they claimed that was possible easily back in 2017 and 2018.

I think what Tesla is basically saying is that Model 3 production growth depends on getting cost/price down. Tesla could quickly scale up to 7K if it wanted but the demand for that amount of high end versions isn’t there, Tesla needs that SR version which takes time as cost needs to come down first.

This all takes time, as usual more than Elon Musk was shooting for but so what, Tesla is still doing something that’s completely unmatched in the industry (Tesla now owns 80% of the US BEV market remember?) with not even a Model 3 competitor in sight.

Also the shareholders letter may “only” guide a 45-60% in car sales over 2018 but also only a 10% increase in operating expenses, sounds pretty good no?

Growth is considered over the entire year, you know that. There is huge growth vs 1H2018. What will the run rate be end of next year? About 550,000 (with maybe 380,000 vehicles completed in FY2019), then you will complain why they only sell 600,000 vehicles the next year…

In less than 5 years we will see over 1,000,000 vehicles annually from Tesla.

“In less than 5 years we will see over 1,000,000 vehicles annually from Tesla.”

Tesla is lucky to survive in its current form over the next five years (with current shareholders, the brand will live on) in my opinion.

It will take a long time before they even cross 500-600k cars / year in a best-case scenario – remember that the Model Y isn’t coming before the end of 2020 (it keeps slipping further, was supposed to ship in late 2019 once).

Tesla will have NO new products (mass-market) for 24 months while a lot of EV competition is coming to showrooms before then.

“It will take a long time before they even cross 500-600k cars / year”
2020 will cross 500k with 50% annual increase in delivery. That’s next year. The Model Y is to be revealed shortly and that will be 2020 production ramp up. The Model T (Truck) is to be revealed this year. 18 months before delivery begins on mass market Model Y, maybe sooner. Model 3 SR in similar timeframe. And if you follow and read up enough about everything out there revolving around EV’s you might be more confident that it will happen. I am confident enough to have invested in the company, and a Tesla product likely will become our next vehicle.

“Elon Musk is always late but nobody is able to keep up with him”

That’s brilliant! Who are you quoting?

Sorry, I forgot. I noticed it’s not googlable either, but I can’t take credit for it, it’s a quote I came across in some article and that stuck for obvious reasons.

That is, beyond a shadow of a doubt, the best quote to describe the man.

Growth is in fits and spurts with cars (typically 6 years between redesigns). My guess is through 1H2019 margin increases per car as they improve production efficiency, so even though volume might be similar to 2H2018 they will be better.

There isn’t much growth in 2019 until Shanghai GF comes online and there will be more growth through 2021 when Model Y is ramped up. So YoY growth is still going to be like 50% this year, but you don’t seem to think 50% is very much. It looks like 2020 will also be 50% (from 7000 to 10000/week and up), and when Model Y comes out could be another 50%, so 3 years of 50% growth is not very much, I understand… /s

Ignoring Semi, Model S/X changes, Roadster, energy (seeing 100% growth per year), etc.

Yes, Fremont is basically close to production capacity. Any future growth will be Model Y production at Gigafactory 1 and Model X/Y production at the Shanghai plant.

I think they’ll need a full capability European factory at some point too, do they have the ability to expand Tilburg plant to do more than knock down kits?

The desperation of serial Tesla bashers trying to maintain their “Tesla is about to fail” narrative has passed beyond the point at which even the uninformed could believe them.

Y’all are about as believable as claims from the Flat Earth Society. You few remaining anti-Tesla cultists are just embarrassing yourselves.

Musk has made a number of unsubstantiated claims that did not come true, at least in the predicted timeline. Almost every claim made by GM, VW, and others concerning evs are false, but do you care about that? Is there any concern that GM came to market first with the “mass market” Bolt and produces a shadow of the numbers Tesla does. That was the real joke, now that Tesla owns 80% of the ev market in the U.S.

You can make up your own narration of events but the facts are harsh mistresses that can’t ignored, and Tesla is the premier ev car maker in the world, and that’s a fact jack, so grow up, you lost, get over it.

Love how folks like you instantly show your bias against Tesla in your very next (negative) response is completely unrelated to your first. It’s like you’ve got all this pent up negativity and you can’t spew it out fast enough.

(Meanwhile, Tesla continues to successfully march forward.)

Pent up negativity from short seller. FUD, fear, uncertainty, doubt. When it looks overly negative it’s that, overly positive is possible too, but 50% growth is already very positive so how can there be so much negativity? Short sellers maybe…

More efficient production methodology based on lessons learned from Fremont and lower cost for workers add up to overall lower production costs and the ability to sell the Model 3 at lower prices. $35k is the base price based on higher cost production out of the US. Models produced in China should hit the $30k price point with the potential for global exports. I see the European production of base models switching to the high volume China manufacturing plant, while the higher trim level models still come from the US. As it relates to the China Gigafactory construction, remember it is China that built a 57 story skyscraper in 19 days, or the railway station in 9 hours using 1500 construction workers, building a 15 story hotel in 6 days, or building 10 homes in 24 hours. Maximizing manpower can get things done very quickly and the Chinese construction industry seems to be very good at it. This is why Elon talked about the construction project going ‘lightening’ fast. For production to start on the Model 3 by end of year, I expect external construction to be mostly complete by June, with interior construction done by Sept, with training models… Read more »

Right. Also, don’t forget that Tesla owns Grohmann now, so the entire assembly line can be built in Germany then shipped over to Shanghai when the building is ready to receive it.

..and not by air freight, this time. Good Point.

NOTHING from Tesla will be exported from China.
Please quit spreading FUD.

And considering that Tesla is adding manufacturing to their assembly plant, that will likely be M3.

“NOTHING from Tesla will be exported from China.”

They will export Model 3/Y from China to other Asian countries.
They will export parts from China to the US and Europe.

That’s not “nothing”.

Well, Tesla certainly has strong motives to get Model 3 (and eventually Model Y) production going at the Shanghai Gigafactory ASAP.

But to do that only a year after ground-breaking… can Tesla do it in half the time that such things normally take?

Good luck to Tesla with that, but it looks to me rather like Elon is back to being his old unrealistically optimistic self.

It’s not half of the time.

Most large, modern car factories take 3+ years of time to build and then ramp up.

Tesla wants to do in 10-11 months.

Good luck with quality and service / warranty costs.

PS: Porsche finished their new factory for the Taycan EV 12 months before production is starting:

https://t.co/xjUcNNymkM

What that video and see for yourself.

A difference is this is not a new line. New lines take a bit longer. This is just replicating an existing line, in fact they can clean up things as they aren’t tied to the Fremont factory form factor and know how the lines work now.

Many car companies had built / build their car models in one country (usually their home base) to start with – then transplanting production of that model to another country.

It still takes a lot of time.

We will see… late 2019 looks totally unrealistic to me for VOLUME production.

It’s late 2019 on the MuskCal app. Tesla’s official guidance is for 3000/week by Q2 2020.

Hopefully they won’t replicate the total botch job in Fremont.

Wow, Tftf, and you started your comment so well. I actually agree with your first sentence!

But the construction site never was a “swampland”, and now that proper drainage has been put in place, isn’t muddy anymore either.

A photo from October 2018:

https://i2.wp.com/electrek.co/wp-content/uploads/sites/3/2018/10/Screen-Shot-2018-10-22-at-8.43.27-AM-e1540212796316.jpg

The latest financial report from Tesla clearly specifies such things as stamping and a paint shop are to be installed at the Shanghai Gigafactory this year. So your remark about “slapping together imported kits” is… well, it’s every bit as wrong as about 99% of your assertions about Tesla and its cars. It may be that what we’ll see later this year is a lot closer to what Tesla does at its Netherlands “final assembly” plant than an actual operational automotive assembly line, but that’s still not even close to “slapping together imported kits”.

For someone who spends so much of his time writing and posting hardcore serial Tesla bashing posts, you seem to be remarkably uninformed about what Tesla is actually doing.

Tesla can easily parallel construction in Shanghai, with line production construction at Grohmann in Germany. Tesla can then time moving the lines to China when the facility is ready.

That sounds good on paper, just as Elon’s plan to speed up production at the Fremont plant by using touchless assembly lines with robots working at eye-blurring speed looked good on paper.

Reality imposes some real-world constraints. It’s all very well to say that the Chinese can put up a building in a remarkably short time, but what takes time in setting up a factory and fine-tuning it for mass production isn’t erecting the walls or putting a roof on top.

“Nine women cannot produce a baby in one month.”

It’s a fair point, but also consider they are creating a line for an existing vehicle this time, it shouldn’t take anywhere near the time to get a new line running in a new factory for an existing model as it would for an entirely new model. They’ve learned many lessons over the past year.

Plus 75% alike Model Y should improve ramp up time too.

I didn’t say / predict they will do this – I said it’s the only way they COULD make it work in the projected 10-11 months in my opinion.

Starting volume production in late 2019 is a crazy projection – again, Musk is talking about VOLUME production already ( 3k cars / week), not some prototype test runs.

A modern car factory takes 3+ years to fully ramp up – you could work 24/7 in China (does this make sense? Quality?…) and maybe make it work in 18+ months, that would still be well into 2020 starting from today.

Anyway, have a look at this video from Porsche what it actually takes to build a modern and efficient car factory:

https://player.vimeo.com/video/290265097

This is a timelapse for their Taycan EV – it was mostly done as of late 2018. And remember that the Taycan only starts production as of late 2019.

Let’s say serious production is delayed by 6 months as serious production of Model 3 was effectively delayed 6 months, does that really matter in the grand scheme of things?

You can keep harping on how Elon Musk is always late but everybody knows that by now but the thing is: it will get there and years before anybody else.

In a tent on pontoons, the first floating factory in the world, Elon stop….your too much!
I wonder who is going to teach quality control since Elon fired those people?

The 9% of the workforce which got cut due to poor performance is the guys Elon should have turned to, to improve Tesla’s quality control?

Are you on drugs? 🙄

Man, according to the media, Tesla’s on the ropes. Expanding production into other markets (like China and Europe) sure is a funny way of showing it.

Tesla bashers like you certainly are increasingly desperate, after Tesla had two quarters in a row showing strong profits!

Tesla won. You lost. Get over it!

You lost me at ‘fanboy.’

This is no atypical in China — they don’t let red tape slow them down…..

Centuries of entrenched corruption at the local and Prefecture levels, and local officials expecting to be sucked up to and bribed, perhaps repeatedly, before they’ll approve even the simplest of things, certainly does slow a lot of things down in China. Just try to get an EV charger installed where Chinese park their cars at night! Getting approval from the local electric utility is a nightmare. Maybe you don’t call that red tape, but *I* certainly do.

I expect Tesla has had to hire locals to deal with all the bribery and red tape necessary to “facilitate” rapid construction of the Shanghai Gigafactory.

China has built more high speed rail in under 10 years than all the other countries in the world have built ever!!
There is nothing difficult with putting up a simple warehouse.. hell all if it could be prefabbed starting now. Once concrete footings are in it could be built in weeks.
They did build a skyscraper in a month after all.

It’s not just about a hangar or an empty factory.

You need precision robots, fine-tuning, testing, hiring skilled people, training these new employees etc.

Look at timelines of modern car factories – even those built in China.

Again: We are talking about VOLUME production, not some test runs with prototypes.

I’m sure while the building is being build Grohmann Engineering will do the the machines in time to fit them when the building is finished. Tesla grew it’s personnel numbers by 30K last year, it’s almost as if hiring and training isn’t such a lengthy process. from what I hear assembly line workers can be ready for action after only a very short period of training.

Is not that simple. Tesla could fly the entire line from Fremont to the new factory and I guarantee it would take a months to get it working producing like product. Variations in how level the floor is, airflow through the factory can change a lot of things.

Grohmann won’t build most of these machines.

I think that is just Tesla goals. Elon always set aggressive goals. If you aim high, even if you miss, you would still be higher than if you have aimed low.

Elon is famous for setting “almost unrealistic” goals for people to reach. That is one way to stay way ahead of competition.

But I will be glad if they can reach production by mid 2020. I don’t mean by hand building couple cars by the end of 2019. I mean reach somewhat a normal production rate of more than 2,000 per week.