A well-run production line produces about the same number of units per week. Tesla's weekly numbers are all over the place. Their cost per unit has to be very high, because the cost of running the plant is roughly constant as the output varies.
Eventually Tesla ought to get their plant debugged, but if they're doing assembly in a tent, that's in the future.
They also seem to be having trouble at the battery plant in Nevada, which is strange. That's a relatively simple product, and it's one they've built before.
Among other reports: https://electrek.co/2018/05/25/tesl-model-3-massive-shipment...
Phase out starts with the same tax credit still applying for the remainder of the current quarter and the next one (before being reduced in later ones) and that's exactly the reason why they would want to match reaching the threshold to the beginning of a new quarter. This way they have as much time as possible to ship as many cars as possible to their customers (that's OK then since numbers sold do not affect the phase out beside the threshold of 200 000 cars).
Tesla is near the 200k mark and has been holding back domestic sales so to hit it at the beginning of a quarter (i.e now).
Edit: Here is a link to the official explanation of the credit in glorious IRS legalese (https://www.irs.gov/irb/2009-48_IRB#NOT-2009-89).
Relevant quote from the IRS to this discussion:
"The new qualified plug-in electric drive motor vehicle credit phases out for a manufacturer’s vehicles over the one-year period beginning with the second calendar quarter after the calendar quarter in which at least 200,000 qualifying vehicles manufactured by that manufacturer have been sold for use in the United States (determined on a cumulative basis for sales after December 31, 2009) (“phase-out period”). Qualifying vehicles manufactured by that manufacturer are eligible for 50 percent of the credit if acquired in the first two quarters of the phase-out period and 25 percent of the credit if acquired in the third or fourth quarter of the phase-out period."
This is what is confusing me: if the credits are timed to domestic sales (so international sales don’t affect the timing of the tax credit phase out) what does this have to do with production?
Rather, you don’t want to rush to produce vehicles you don’t want to deliver quite yet. You want to get to maximum output at the same time the timer starts on federal tax credits phasing out (which, keep in mind, would’ve happened without Model 3 production due to 2k/week Model S and X production).
tl;dr they'd basically benefit from an additional 336M in government subsidies if they delay recording their 200k'th sale to July 1 instead of June 30.
Are you on a different page?
Heck, those in the know said even a couple of months ago that Tesla would not be able to achieve 5000 Model 3s by today.
The truth is, there aren't really any people we can claim are "in the know" when it comes to new, innovative approaches to manufacturing.
Maybe Tesla will fail, maybe it will succeed. I don't think anyone actually knows one way or another. Elon Musk and his crew are trying something no one else has bothered to try before and we just have to see how it goes and what lessons can be learned from it.
The first is an estimation of difficulty - probably an educated guess that could be wrong. The second is a statement based on the evidence in front of you.
Secondly, whilst it's true that people have been saying Tesla won't get to 5k/w, it's also true that Tesla were claiming they'd have a fully automated production line. If Tesla gets to 5k/w by hand-building them all then in most people's eyes they've failed. The value of Tesla is not the actual production of cars. It's the IP of their self-driving technology, and the IP for their fully automated production line. There's a reason Tesla's valuation is completely unlinked from their production capacity.
Difficult things have been done all time and being done even as we speak now. Its not very hard to be positive about difficult things happening even in the present.
The real problem is the discomfort with anything new, and the fear of new order of things.
There is also a certain amount of risk taking ability that goes away when you become intelligent(expertise). That's because expertise is an investment in time, and there fore a good part of one's life. Watching that get washed away, or giving it up to start a new life is very hard. Its a huge mountain of emotion which you have to scale up and then down. People would rather let existing order of things prevail as they are.
The second part is people find it hard to put what is already done aside and start afresh. I have even forgotten the count of number of people who I have heard telling they can't learn something new, or begin on a new heading because they have travelled too long down the current path. Sometimes this is for things as simple as starting a new hobby.
So Tesla will likely win, and people won't be happy seeing it win. People are not comfortable watching live anti-thesis to their excuses.
And are they really "trying something no one else has bothered to try before"? Altogether, an electric car is simply not that much more new or different from a conventional one, these days. In fact it's much simpler. A lot of the learnings of the last 40 years would absolutely apply.
We'll see!
Really? Who said that?
Exactly the point. Yet the struggle is real with Tesla, for some reason.
Wasn't it in multiple letters to shareholders? It is literally an update to debtors on the company's position, far from arbitrary.
Were Tesla required to give an estimate? Nope. But doing so may be used to attract further investment into the company, so it is far from innocent.
Debtors are people who owe you money. The word you are probably looking for is “creditors”, who are people you owe money (e.g., corporate bondholders.)
But, while it's closer, stockholders aren't those, either.
There are two things you could disagree with but you don't specify which. You can disagree that Tesla set this goal for itself, or you can disagree that the number 5000 is arbitrary.
To disagree with the first part, you'd need to show that the 5000 figure came from an external party, do you have such a source for this?
To disagree with the second part, you'd need to show that there is something significant about the number 5000. Is your claim that there is some significance to the number 5000?
If you can't substantiate the claim that some external party gave Tesla the goal to make 5000 vehicles per week, and you can't substantiate the claim that the number 5000 has some fundamental significance when it comes to car manufacturing, then you have no grounds to refute the statement that Tesla set this arbitrary goal of 5000 for itself.
Unthinkable? Their Q4-16 Shareholder letter [1] (Feb 22nd, 2017) stated: "Our Model 3 program is on track to start limited vehicle production in July and to steadily ramp production to exceed 5,000 vehicles per week at some point in the fourth quarter and 10,000 vehicles per week at some point in 2018."
On July 2nd, 2017 Musk forecasted [2] 20,000 per month by December '17.
[1] http://ir.tesla.com/static-files/1ff901ba-bb25-4264-9153-7aa...
Giving this the new estimate is placed to summer 2018.
When that was missed, it was pushed back again to Q2-18. It looks like those shifting goalposts have finally been met but for the above poster to call it "unthinkable" is absurd. It's the exact messaging we've been hearing for at least a year and a half.
[1] http://ir.tesla.com/static-files/d68bddfe-6f2b-4f8f-bed0-94d...
That's the important thing. A lot of people are concerned about Tesla's ability to raise money and stay solvent. Tesla will not be profitable, or even cash-flow positive, until enough Model 3 cars are made.
Every month Tesla fails to reach a high-degree of production, Telsa loses another $75 million.
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The worst part about this rampup effort is how bursty and unreliable it is. Its going to be a one-week hit of 5000. Next week, or even next month, Tesla's sustainted output will be well below 5000, and therefore Tesla will remain unprofitable for another few months at minimum.
That's not even factoring in all the costs Musk threw down for these tents (Obviously a temporary arrangement, as a single storm will put those tents out of commission).
But the thing is, they did triple their q1 production, going from 9.7 to 28.5k so they almost trippled, or went from an avg of 9/12 weeks to 28/12 weeks, a clear increase. The newly announced goal is 6k by the end of August. It doesn't matter if through super-human work they get one week that is good, we can just measure their performance by total production, so I'd guess at least 50k would be another significant increase. It won't be 6k*12 weeks in q3.
Lost in this is the significant additional revenue they get. They aren't making their cheapest cars yet, so at 50k each, that last week alone was 250 million additional revenue. That 28.5 cars is about 1 billion more in revenue than q1. If they double that again, you are talking real money :-)
- 2,425 model 3’s in Q4 2917, about a third (793) of them in the last week of 2017 (http://ir.tesla.com/news-releases/news-release-details/tesla...)
- 9,766 model 3’s in Q1 2018, about a fifth (2,020) of them in the last week (http://ir.tesla.com/news-releases/news-release-details/tesla...)
So, the Q1 average was about equal to that last week of 2017, but only because of a massive sprint (20% of production was in the last week of the quarter)
If that pattern has repeated itself, we should see about 26,000 model 3’s produced in Q2, 5,200 of which in the last week.
Also, based on these data points, they won’t produce 5,000 next week, but next quarter’s sprint will bring the average there.
I wonder what the cost of reaching that milestone is. That extra factory wasn’t free, and they either are driving their personnel into the ground or they had to hire and pay a lot more people (possibly even both, as new people being hired will need training)
http://ir.tesla.com/news-releases/news-release-details/tesla...
As long as tesla doesn't die i'd bet Musk will find a way to crank up the next stage.
At some point, he'll need to understand how to design an effective large-scale manufacturing system, and not simply yell for one.
Specifically, he should actually learn some things about managing people, and the place that has in producing quality at volume at speed. It's sad, because that's exactly the lesson Toyota was trying to teach at NUMMI, and their legacy has been totally forgotten by its new owner—at great cost. It's simply a shame.
> "According to this, they're using 7 times as many employees and still making less than a 1/5 of the cars NUMMI did when they had the factory." https://insideevs.com/teslas-fremont-factory/ -- via https://twitter.com/Benshooter/status/1012113642689519617
(albeit they're earlier in their maturity, for sure, but still)
Let's just see now.
Musk wanted to grow a plant on Mars, and when the Russians pulled out of a deal to sell him a couple of ICBMs he decided he would will his own rocket into existence.
Then he decided he wanted it to be reusable, so he willed that into existence when everyone said it was impossible.
Then he wanted to strap three of them together, so he willed that into existence.
Then we wanted electric cars, so he willed into existence not only the best electric car ever, but one of the best cars ever, period (Model S)
etc. etc.
I think it unwise to underestimate Musk.
That said, I think he'll get it done, but it's still arrogant (and inefficient) to take all of the learnings of manufacturing and management of the past 30 years and try to "start fresh."
It's a waste. It's a waste of money, a waste of time, a waste of human capital and life and happiness. He's expending energy to learn things we've already learned.
That's the sad part. I'm sure he'll get it done, but at what cost? At what despair and unnecessary strife? And at what level of waste and inefficiency.
Sure, you'll say, necessity is the mother of invention, and new knowledge and innovation will come out of this struggle—but how can we know even more could not be done in a better process? We can't, and this naysaying will go by the wayside. As perhaps it should.
I disagree that he’s not good at managing people, he just has very different success criteria, which do not highly rate the welfare of his workers. I think like Jobs, Bezos and many other successful business leaders he’s good at finding talented people, selling them a dream, and wringing every last ounce of life out of them in service of his dreams, then finding someone else to keep it going. A lot of people will be broken along the way, a lot of people will produce their best work.
Hmm. This strikes me as somewhat implausible or at least uncharitable.
Are there other example of doing something as complex, in a 'new' field, at a scale to compete with incumbent operators AND vertically integrating both design and manufacture?
If one zooms out a little to place what Tesla is doing in context, or Musks 'performance', it doesn't seem they've been particularly bad per se, more that they've faced difficulties that are inevitable. It's somewhat of a testament to them 'doing well' and learning to do it pretty damn quickly that we here can continue to talk about how bad they continue to be - namely because they're still around and not dead and disbanded.
I may, of course, be talking rubbish seeing as I don't know much about this subject nor do I have a horse in the race. But it just strikes me that Tesla is doing something extraordinarily hard (I know about the logistics of supply chain management and that's hard enough in the auto industry) and being played out in public view with intense competition.
The shame is that the parts that are innovative, like the engineering of an electric car, the design, the interface, and the battery technology, are all going so well, all things considered.
Whereas the parts that don't necessarily require innovation on a major scale, such as management of people, the operation of a manufacturing line at scale, systemic quality control, and safety and health—are being done (by all accounts) not so well. These are the things that are far more difficult than the technology and innovation precisely because they are so much more complex, and require a different mindset. For the same reason Musk is so good at engineering, it is not totally surprising he is not so spectacular at leading the human systems required for this new pursuit. Again, by all accounts.
And the sad part: these are the parts that have been done before, in similar situations, at similar scales, with similarly new technologies, without drastically different requirements or problems. Having that experience available to you and not using it is not exactly wise.
All that said, I think he'll learn what he needs to learn, get it done anyway, and will not fail. Making this point of efficiency at this stage pretty moot. I realize that.
They'll burn through supposed 450K before the end of Q3, and then the order book is dry/cash crunch time for Tesla.
Further, I expect the number of people who can put down 1k and wait with no new car for a long time is but a small fraction of those who can buy without those substantial barriers.
And an assembly line. In a tent. From a bunch of scraps.
Don't get me wrong, I absolutely admire what Elon Musk is capable of. But it's worth being realistic when we draw opinions of leaders lest we fall victim to hero worship.
Are there really? I feel like a massive percentage of people are against Musk and Tesla precisely because he's trying to do something new, and take some risks.
It's like a majority of Americans don't want anyone to do anything radical anymore, like they're happy to stagnate.
I just want to point out one thing: hustle is valuable. Not all companies can sprint like this when they need to.
In both cases, me and colleagues made the same amount of money, experienced a degree of burnout, and if anything taught the company they can do it again if they want. Hustling at a sustainable pace? Sure. Sprinting, like death marches, just burns employees.
I would resist commenting, but I know those Tesla employees won't be getting a huge bonus or extra time off. I wonder how well it will go for them the next time.
The anti-Tesla posts are always overflowing with empty, overly emotional statements. No matter how many times Musk overcomes and ultimately delivers in the end, it doesn't matter, the anti crowd returns for the next fight with the exact same emotional arguments.
Maybe it's just all BMW, Toyota and Mercedes employees doing the trolling around the Internet (joking). Every ~$40k+ vehicle that Tesla sells comes directly out of their pockets (it's certainly not coming out of the pocket of GM and Ford). Over the next year, Tesla will take $20+ billion in sales away from the luxury auto makers. The bigger that number gets, the more desperate BMW, Mercedes and Toyota (Lexus) are going to get. Hundreds of billions of dollars are on the line.
If you go back and read forum threads around the time the Model S was launched, people were claiming back then that Tesla could never build it in any volume period, that it would be a failure across the board. Similar claims were made about the Model 3 right out of the gate; they weren't supposed to ever make it in any volume, the venom in every thread was extreme to say the least.
There's a type of person that aggressively hates successful people, and often success in general. They resent everything about it, they lust after tearing people down. Musk succeeding with Tesla is a perpetual open wound for those types.
Where will production rates fall in the next few weeks compared to this almost-5000-a-week sprint?
At what point do you consider the report of weekly production numbers to be fraud? Whose definition are you using? Which court will back you up?
I think this is the million dollar question—was this just a sprint effort to hit a milestone for PR sake or will they produce 5000 next week too?