His point was that the supply chain is there and working well. Tesla has a non-trivial amount of work to do to be able to catch up to those sorts of production numbers.
Well yes, that is the point. Tesla's deliveries have been limited by their production capability for a while now. If the problem was a lack of demand, you would expect inventory to grow or production to slow, but neither of those have happened (beyond a slight decrease in production due to COVID related closures).
I was looking at the wrong data. At any rate, the point is that Tesla is trying to ramp up production very fast. Going from 50,000 to 100,000 cars sounds difficult in 12 months, while maintaining quality.
It's not an under-supply problem that supply chain or unions or demand would cause. It's an over-supply problem. Tesla made 46,000 more cars than it could sell.
The strange thing is, Tesla finally seems to be getting decent production rates on their Model 3 line.[1] They got 2500 cars out the door in a week at peak, which is respectable. Until recently, output was so low that it was clear the line wasn't working right. They then shut down to retune their production line, which makes sense. They should soon be cranking about 2500-3000 cars a week without much fuss. Once first shift is running smoothly, they can add a second shift.
Tesla may be over the hump on getting the business working. But profitability is still a ways off. Tesla may need more capital to get there.
What Tesla doesn't need now are distractions. The truck, the new roadster, the next model, self-driving. They need to focus on shipping product before the money runs out.
> Most other manufacturers work out the kinks before mass production begins.
The vehicle quality reviews on the bottom half of all auto manufacturing says otherwise.
> If Tesla could demonstrate that they were actually capable of producing 20,000 Model 3's in a quarter, people wouldn't be so pessimistic.
They keep proving an ability to produce volumes of cars, and people keep acting like they've never built any cars at all -
"As for its higher-priced Model S sedans and Model X sport utility vehicles, Tesla said it delivered a record number during the quarter. Model S and X deliveries grew 10 percent globally over Tesla's prior record in the third quarter, and were up 28 percent compared to the fourth quarter of 2016."
Right now they're forecasting 2,500 per week of the Model 3 for the end of the first quarter. If they can hit that very near-term marker, they can hit 5k in the fourth quarter.
The way the skeptic game has worked - all the way back to the Roadster days - with Tesla is this: the skeptics say blah blah blah, Tesla can't blah blah blah. Then Tesla eventually does what they say they will. Then the skeptics move the goal post, and the entire cycle repeats, while the skeptics continue to pretend Tesla has never produced vehicles at volume. Meanwhile Tesla keeps powering forward, selling more and more vehicles each year, with their revenue skyrocketing.
Why were they able to meet a run rate or 500k cars a year in Q4 of last year and not sustain it if their factory was maxed out? And why would they claim in projections that their factory was capable of producing that if they didn’t meet that?
Companies are rarely production constrained. Many claim they are, but the fact that Tesla sales in their two largest markets declined doesn’t indicate to me that production is their number one issue.
Tesla has long wait list and they are growing very fast.
The only reason they didn't grow even faster this quarter was because of a suprise COVID shutdown in China.
They have opened 2 new factories in Q1 that will ramp this year.
They have also raised prices and those price races will only be reflected in future quarters because of long lead times.
> And data already suggests this is on the decline. So this needs to be taken in context.
You can't go from making a general statement about demand for auto producers and then just apply it to Tesla. Once you think about the Tesla specific context its the opposite of decline.
So far as I've been able to determine data total sales of Model S cars seem hard to come by. You'd think Tesla would be a bit more open. I'll go ahead and throw in my own estimate of about 30K to 40K Model S cars sold since the beginning of time. I could be wrong, but I doubt I am wrong by an order of magnitude.
In sharp contrast to this, once you are selling millions of cars per year ([1]Ford, 2013, 2.5MM; [2]Others) this idea of making twenty changes per week that actually make it out to the production line is simply impossible.
At volume supply pipelines have huge inertia. You can't make changes on a whim. Doing very simplistic math and assuming a JIT process, Ford receives 50,000 parts per week. Tesla, assuming 20K cars per year, receives 370. I am not trying to be dismissive, but that's the difference between a garage operation and a real industrial operation at scale. A constant flow of 50,000 parts per week needs to be planned months in advance with all sorts of tests and controls during the process. Changes require the same planning and effort. Imagine making a change that does not work well (for whatever reasons) and you have 50,000 parts per week descending on you. By the time you make a change tons (literally) of raw materials are being processed at some factory, container cargo ships are in the middle of the ocean on their way to your port and trucks are en-route to deliver your parts for the coming wees.
At a few hundred parts per week you can pretty much afford to experiment and throw out whole shipments if something goes wrong. Your supply pipeline is much shorter. You don't have dealers to feed and contractual obligations in terms of delivery. You don't have the same kind of output pipeline. Add to this perhaps having a lot of the small-scale manufacturing done in-house and, yes, it's a garage operation, an expensive one, but the scale simply doesn't compare to that of a high volume manufacturer.
I am not saying any of this to diminish Tesla. It's a neat company. Their cars are not for the masses. And that's OK. However, I really don't subscribe to the idea of Musk walking on water. Is he a great CEO? It sure looks that way. Nobody could dispute that for a minute. I am simply proposing that we do not ascribe supernatural powers to an organization that operates at a scale and within a framework that allows it to behave in a manner very different from that of larger volume producers.
What a great comment. Does anyone know if Tesla went the old automaker way or do they stockpile chips and/or had better forecasting on demand during pandemic? It seems their production is doing great.
Selfish reason, I want to know if my Tesla order will be delayed.
> Automotive revenue is basically flat year-over-year. Total revenue is up only 2%. So, Tesla isn't really growing.... On the plus side, Model 3 production and sales are up over 40% YoY which is excellent, but it's clear why revenue is flat: Model S/X sales are down significantly and they carry a high price tag. For every three Model 3 sales, they lost a Model S/X sale. That's certainly to be expected. The Model 3 is really nice. However, it does mean that revenue is flat.
In Q4 2018 they sold 27,607 S/X, and in Q4 2019 they sold 19,475 (-8132, 29%). In Q4 2018 they sold 63,359 M3, and in Q4 2019 they sold 92,620 (+29,261, 46%). Vehicle production over the trailing 12 months increased from ~245k to 365k (~50%).
Why didn't revenue grow? It's not just the 8,000 fewer Model S/X, because S/X doesn't cost 3.6x a Model 3. Just as important was the ASP of the Model 3 fell... about $7,500 to be precise.
> If they're pushing out around 600k cars this year, becoming 10x the size would put them in the same place as Ford and GM. A 17x increase would make them larger than Toyota. But that's going to take time. It looks like Tesla is looking to increase production capacity by 15.6% in 2020 (from their slides).
Tesla says their current production capacity is 640k vehicles (I was surprised by this - it's well beyond the promised "500k run rate by the end of 2019", so I think we're seeing the full effect of Giga Shanghai turning on here).
By mid-2020 Tesla has said they will be running at a 740k annualized production rate based on added Fremont capacity for Model Y. They have said they intend to increase Model 3 capacity in Shanghai and have at least equivalent capacity for Model Y starting in 2021. That means Shanghai + Fremont will be producing nearly 1m annually in 2021. Now, at that point Berlin will be coming online, which is planned to produce 500k units/year. The upshot I think is that production capacity is increasing at a rate of 40-50% year-over-year -- I'm not sure where you got 15.6% from.
> Even if they're the next VW (the second largest auto maker sitting just behind Toyota), VW is only a $95B company - and there's a lot of risk between now and Tesla selling 10M cars per year.
Many people confuse market cap with enterprise value. VW enterprise value is $255B vs $110B for Tesla. You have to subtract the outstanding debt, of which Tesla has very little compared to most automakers, before you get down to Market Cap, which is the value remaining for the shareholders.
All that said, it is clear that the current valuation of Tesla has ceased to be based purely on fundamentals.
I think it is more they can make the same number of vehicles in a smaller space, thereby doing it faster and more profitably. Tesla's gross margin (profit per car essentially) is 10-15% higher than most all of the rest of the industry. He is pointing out that doing it better makes them more competitive.
Currently, the Volkswagen Wolfsburg Plant is the biggest automotive factory in the world by number of vehicles produced by a single factory. That number is 815,000 vehicles per year. The tesla factories that are currently built are in theory capable of 1 million vehicles per factory apiece, but are not there yet. If tesla can out-manufacturer VW, obviously they'll be more likely to sell more vehicles, and further erode VW's business.
> Looking at the future, Tesla said it expects to deliver 47,000 to 50,000 Model S and Model X vehicles combined in the first half of 2017, representing vehicle delivery growth of 61% to 71% compared with the same period last year.
They fell short of their goal of 80,000 vehicles in 2016. You're talking about almost doubling their production in 2017... and then doubling it again in 2018! Ain't gonna happen.
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