Tesla Model 3 Production Down As Mid Range Ramp Begins

NOV 4 2018 BY MARK KANE 36

Production at the Tesla Factory decreased to 5,000 S/X/3 per week

Tesla’s ramp-up is kind of a neverending story of almost 1.5 years since the introduction of the Model 3. The most recent news is that the end of October brought a significant decrease in production rate.

Electrek’s sources say that Tesla was producing only 5,000 cars per week (including about 3,500 Model 3), which is less than in the preceding week – 6,500, including about 4,400 Model 3 and far from peak output.

The reasons behind slowing production could be a transition to the Tesla Model 3 Mid Range version and maybe some new upgrades on the production lines that will enable an increase in production to 7,000 Model 3 per week.

Overall, in October, Tesla produced apparently some 30,000 cars (including about 20,100 Model 3), which is the best start of the quarter ever for the automaker.

It’s not looking like a six-digit sales result for the quarter will probably not be achieved:

Source: Electrek

Categories: Tesla

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36 Comments on "Tesla Model 3 Production Down As Mid Range Ramp Begins"

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John

“It’s not looking like a six-digit sales result for the quarter will probably not be achieved:”

Did you mean to double negative?

Roy_H

I bet yes. Personally I don’t like that style of writing and even better leave out “probably”. Should be “It is looking like a six-digit sales result for the quarter will be achieved”

Nix

I’m not positively sure if they didn’t mean not to do that without not knowing that’s what they didn’t want to do.

Nick

It doesn’t seem like Tesla have that much demand in the US for the model 3 versions they are currently offering if the mid range is already in production before the end of the full tax benefit.
I’m surprised that they haven’t switched production earlier to European supplies.

Pushmi-Pullyu

There may be homogulation issues to be worked out before shipping Model 3’s to Europe. Dealing with international regulations isn’t something which can be rushed.

What surprises me is that Tesla has offered the lower-cost Mid Range version of TM3 rather than offer leasing, which would certainly increase demand for the currently rather limited number of trim levels of Model 3’s available to buy.

Lawrence

The Mid range didn’t reduce GP and perhaps could increase revenue if it results in more units sold. Leasing for Tesla would require for a 3rd party to offer it. Tesla doesn’t have the ability to offer it themselves without affecting cash flow. Without historical residual values to provide, perhaps it has been too risky for anyone to want to partake in.

Based on the demographics and price that the Model 3 LR is in, leasing is an extremely important component to offer.

AnonyMouse

Lawrence said:
“Leasing for Tesla would require for a 3rd party to offer it. Tesla doesn’t have the ability to offer it themselves without affecting cash flow.”

The more pressing reason why Tesla would need a 3rd party to offer it for lease rather than leasing it out themselves is because Tesla cannot take the $7,500 Federal Tax Credit (FTC) themselves, since Tesla has no net income and therefore no federal tax liability. Since Tesla can’t take the FTC, it can’t pass the savings to its leasing customers in the form of reduced cap cost resulting in reduced lease payments.

Kbm3

They do have net income.

Nix

Tesla Financial….

God/Bacardi

Musk tweet on June 2: “Leasing negatively effects Tesla cash flow, so we prob won’t offer Model 3 leases for 6 to 9 months. Loan financing is a better deal anyway, as bank conservatism for new car models is v conservative about residual value, but Teslas have always had strong residual value.”

Nix

When exactly to you think Tesla green-lighted the MR that was announced mid Oct? It certainly wasn’t in Q4, that is way too late. Are you saying Q3 demand was low? Q3 demand was far from low, see the scorecard. Any attempt to link the MR to demand fails when looking at the timeline.

Tesla put out the MR as an attempt to mitigate the fact that the SR needed design changes that pushed it to 2019 (see the insideev’s archives). Tesla created the MR as a best-effort stopgap to allow folks waiting for the SR to get a cheaper car before the fed incentive expired. It may have even been green-lighted for production as early as Q2 when Tesla announced the delays for the SR would push production back until 2019. The MR was an attempt to meet consumer demand. Did you know that a website with surveys from over 10K reservation holders actually showed that demand for a MR was as high as SR or LR batteries?

Do you think trying to meet consumer’s desires with a product they asked for that Tesla never offered is a bad thing?

Pete

“In a Tuesday interview with Bloomberg, the head of Panasonic’s Automotive Division said that the company was on track to complete an additional three battery-cell production lines at Tesla’s Nevada Gigafactory before the end of this year. That puts the expansion ahead of schedule for completion.”
The logical reason for MR is to stretch the cell production so it can keep up with the ramp up of the rest of the model 3. I expect that the long range model will be offered as soon as cell production is increased enough to support it.

Nix

Tesla has been selling the LR version since July 2017. What do you mean by “the long range model will be offered as soon as cell production is increased enough to support it.”?

Doggydogworld

He obviously means LR+RWD, the original configuration. I disagree, but it’s all speculation at this point.

pete

since about Oct. 19 LR-RWD has not been available except by special order and about Oct 25 they stopped the special orders.

BojanF

Tesla can basically sell all it can make domestically until the full tax credit expires. That’s why the start of production for EU coincides with the expiration of the full tax credit.

Nix

Each time Tesla has cut Model 3 production in the short term, they have come back with higher long term weekly production numbers after the short-term slowdown.

In other words, the Model 3 is in mass production, and is still in mass production, and will continue to be in mass production.

TM21

What is your definition of “mass production”? >3000 cars per week? 2000? 4000?

Roy_H

I think generally in the industry anything over 500/wk is considered mass production.

Nix

My point is that weekly or monthly variances in production numbers won’t change the fact that the Model 3 is firmly in mass production, and won’t change that reality over the long term. It is a mass production EV and nothing in this story will change that. My bad for not being more blatant with my point.

But to answer your question:
2000/week would be the equivalent of all the Toyota Prius family of cars sold in the US.
3000/week would be the equivalent of Toyota 4-Runner sales in the US.
4000/week would be the equivalent of Subaru Outback sales in the US.

I consider all of those cars to be in mass production, don’t you agree? What is YOUR cutoff on this list of all cars sold in the US which you don’t think should count as being in mass production? Or do you have a special moving goal-post you use just for Tesla?

http://www.goodcarbadcar.net/2018/11/october-2018-the-best-selling-vehicles-in-america-every-vehicle-ranked/

What is your cutoff for considering other plug-ins to be in mass production, considering no other plugin has achieved sustained 3-digit per week sales numbers in the US: https://insideevs.com/monthly-plug-in-sales-scorecard/

ziv

My two cents worth is that you have to be selling (in the US) an average of more than 30k year/2500 month/600 week to really be “mass produced”. Half the 230 different car models sold in the US sell less than 30k a year.
The Leaf hit that level for a single year and that was pretty much it. So at 22k and 17.7k the past two months the 3 is in uncharted waters for plug in cars.

cypress

Even 20k/yr still seems like mass-production to me. I think mass production is more that they are not bespoke, hand-built machines. So some level of automated fabrication and assembly line is needed.

Ziv

I just checked Good Car Bad Car for their YTD numbers. 234 total models, so median is 117/118th place.
117 is Mini Cooper with 22,147 through October (maybe 26,600 for the year?) and 118 is the Lincoln MKX with 22,056 through October (maybe 26450 for the year?). The Model 3 is in 36th place out of 234 models.
20k/yr would be around the sales of a Lincoln MKZ (16,538 so far, maybe 19,900 for the year) or the Kia Sedona with 15,866 so far, maybe 19,010 for the year.
Fun with numbers. Time to get back to work…

Roy_H

If production slowed down that much, then it applied to both S & X line as well as M3. I’m thinking it might be something that affects both lines, paint shop perhaps? I feel confident that the mid-range M3 cost almost no down time at all, since it just requires putting less batteries in the pack. Add the fact that they are already showing up on the streets.

Tesla did announce that new Grohmann robots were to be installed at G1 for battery assembly, that change over may have caused some slow-down. Panasonic has just added 30% more battery production, is all of it for M3 or is some for S & X? We know that S & X have to transition over to the 2170 cells sometime in the near future. It also makes sense to make medium range M3 while the battery production is slowed down with the installation of the new robots.

Nix

To back up your post, Tesla has repeatedly stated that they would need to make minor assembly line changes to get to 7K/week Model 3 production, and major changes to hit 10K/week. So we certainly know that some production cuts will have to happen at some point in the short term in order to increase production in the long term. We just don’t know when.

Battery production is for the Model 3 and for Tesla Energy stationary battery packs. We don’t know if/when they will switch S/X to 2170 cells. I doubt they will tip their hand on that until it shows up on the Design Studio on the website. I’m guessing either with a price cut or a battery size increase. Maybe even with them dropping the battery size from the car name. Model S LR, and Model X LR, etc. Also drop the “D” because they are all d’s now.

Cypress

Switching S/X over to the 2170 cells will require a significant redesign. Tesla currently can’t really handle working on more than one new product at a time. But are working on it. And they have the Model Y and Tesla Semi to do, and the. The Tesla Pick Up. I wouldn’t expect a major S/X refresh until at least 2022.

antrik

It doesn’t require a major redesign, aside from the battery pack itself. Elon claimed back in 2016 that they can fit the new cells in the same pack geometry. I guess they *might* want to change the geometry, to make the best of the new architecture — but they don’t have to.

(And even if they do change the pack geometry a bit: unless they have to completely redesign the chassis for that, it would still be a much smaller effort than creating an entirely new car model…)

antrik

Even if they are “only” omitting some cells in the battery pack, I think it likely still needs some downtime / slowdown to get everything calibrated etc. for the new variant.

Totally agree on the other points, though 🙂 Indeed they likely used the unavoidable slowdown in pack production, to also do much needed paint shop upgrades (and various other upgrade throughout the line) at the same time…

Roy_H

I think they will have to be over that 7k/wk M3 production soon if they are going to sell over 100k cars this quarter.

antrik

Nah, they would only need slightly above 6,000 per week average for the rest of the year. Considering that it’s been close to 5,000 per week in October, a linear ramp to 7,000 per week by year end would more or less do it…

Cypress

I wonder what the cause of the slow down is. It doesn’t look good if they are trying to continue to ramp up, and it certainly doesn’t bode well for the release of the $35k version. Which Musk has said needs 3-6 months after reaching 5000/wk to do, without bankrupting Tesla.

Lawrence

Consider also that with inflation increasing labor and material costs, the longer it takes them to get to 10k/wk so that they can make a profitable base car, the more difficult it will be to make the $35k car, if they don’t adjust that price upwards with inflation. They may need for example 12k/wk to make the same margins by then so it becomes a self defeating goal with time working against them.

David Cary

Doesn’t look good if they are trying to continue to ramp up….
That makes little sense unless you feel like they should double production without slowing down at all. The slow down was pretty modest. I don’t think a one week sort of slow down necessarily changes the time line. I would think 3-6 months of 5000/wk on “average” otherwise holidays and miscellaneous broken equipment that takes 2 days to fix would push that out forever.
We can probably expect a big shutdown around the end of the year as the TC is decreasing – Just because that would be a good time to do it (ie not because there would not be demand).

antrik

To put things in perspective, a week with 2,000 cars less produced than normal equates to a two day production stop…

Andrew

What’s the maximum number of vehicles that can be produced at the Tesla Factory? Wasn’t this an old Toyota factory how many vehicles did Toyota produce there?
Couldn’t Elon open a factory in the UK when all our ICE plants shut down? Should be able to pick up a bargain. Who needs Dyson!

antrik

The Fremont factory has been much expanded since Tesla took it over from NUMMI. It’s not comparable at all, as NUMMI never integrated nearly as many parts of production at that plant.