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Building out a real high volume next generation production line for the Model S and X

Discussion in 'TSLA Investor Discussions' started by Benz, Jan 26, 2014.

  1. Benz

    Benz Active Member

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    During the Conference Call of the Earnings Report of Q3 2013 on November 5th, 2013 (after 10 minutes) Elon Musk spoke about R&D investments for "volume production expansion for the Tesla Model S" and for "building out a real high volume next generation production line for the Tesla Model S and for the Tesla Model X".

    The production capacity is going to rise enormously somewhere in 2014, when this "real high volume next generation production line" will be operational. Although the rise will be steadily, not instantly.

    During the Conference Call of the Earnings Report of Q3 2013 on November 5th, 2013 (after 49 minutes) Elon Musk says: "The production of vehicles is not going to be a constraint, that's not a limiting factor."

    So, ones the supply constraint issues are solved (mainly battery cells) and when this "real high volume next generation production line" will be operational, then they will be able to produce in much higher volumes.

    And in December 2013 The California Alternative Energy and Advanced Transportation Financing Authority allowed Tesla Motors to purchase up to $415 million worth of manufacturing equipment without having to pay sales and use tax. Therefore Tesla Motors received a $34.7 million tax break.

    In which month of 2014 will the "real high volume next generation production line" most likely be operational? And how much will the production capacity be at the end of 2014?
     
  2. PeterJA

    PeterJA Member

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    Maybe we'll find out from the Q4 2013 earnings report and call. Answers to your questions could be the "more good news" (besides 6900 deliveries) that Tesla is saving for earnings.
     
  3. Reykjavik

    Reykjavik Member

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    As long as the battery supply remains constrained, I think Tesla is going to be able to keep the production rates high enough to use all the batteries they can get. Once the gigafactory opens, I expect the production lines to get very busy very quickly. Until then, I would expect gradual increases in production capacity.
     
  4. PeterJA

    PeterJA Member

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    Battery supplies will be much less constrained this year (due to the recent deal with Panasonic), long before any giga-factory exists. Elon said months ago that 2014 would be the year in which Tesla "tests the depth of demand" for the Model S. He never said this ramp up would be gradual.
     
  5. DaveT

    DaveT Searcher of green pastures

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    I think the "next generation production line for the Tesla Model S and for the Tesla Model X" doesn't come to fruition until 2015.

    According to this article back in late May (Tesla Envisions Selling Around 500k Units Long Term):
    "The main goal of the production team currently is to get production levels of 20K on a single shift across most processes (currently body assembly and finished assembly are still running on a 2 shift basis) and then ramp up to 40K units in 2 shifts. For the ramp up beyond 40K, the Tesla Motors Inc will require only $25-$50mn of additional capex to take the volumes to 50K units annually."

    So, Tesla will likely use one production line for Model S until the end of this year. They're probably need to ramp up to higher than 40k unit run rate (800 cars/week) by the end of the year so they'll be spending a $25-50mm capex investment to optimize their current line (likely expanding parts of the line where it's most bottlenecked) to get to a 50k unit run rate (1000 cars/week).

    This year it also looks like Tesla will be building out their second production line to prepare for the Model X, and they should have this second line running either end of this year or beginning of next year.

    It's likely that this "next generation line" is optimizing the production lines so that they can produce the Model S AND the Model X on both of the production lines so it could give them flexibility in production.

    These two production lines (up to 50k cars/year production rate) should get them to the end of 2015 (max 100k car capacity) before adding more lines.
     
  6. vgrinshpun

    vgrinshpun Active Member

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    #6 vgrinshpun, Jan 26, 2014
    Last edited: Jan 26, 2014
    According to this December 17th post on SFGate the maximum yearly production for the expanded line is 56,500 cars (21,500+35,000). Interestingly enough, this goes hand in hand with what Elon was reported to say during the visit to Germany about the battery supply able to meet production of 1000-1200 cars/week (56,500 / 48 = 1177). There is another cross-reference to this number in the lengthy interview Elon gave to a German journalist in which he mentioned that TM at that time was running at 25-30K annual production rate and is planning to basically double it (to 50-60K) in 2014.

    Tesla gets $34.7 million tax break to boost production - Fossils Energy and Clean Tech
     
  7. LakeForest

    LakeForest Member

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    415 million is a heck of a lot more than the 25-50 million capex spending... What could they have purchased? Either Tesla is way worse at estimating costs than even your average home contractor or plans changed. That is a ton of equipment. What are they building out?
     
  8. vgrinshpun

    vgrinshpun Active Member

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    The second production line. One that is being upgraded/expanded - for Model S. It will have capacity of 56,500 per year. By the end of this year they will have to build second line for Model X. $415M covers both.
     
  9. DaveT

    DaveT Searcher of green pastures

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    Thanks for the link. It's a bit unclear what the 35k cars is in addition to. Because in December they were already running at about 600 cars/yr (roughly 30k annual production rate).

    You're adding the 35k cars to 21.5k (what they had expected to produce for 2013). But I'm not sure if that's the right number. I'm not sure if 30k is the right number. Or if it's completely something else. I'd love to see the actual application Tesla submitted for the tax break and what figures they used.
     
  10. DaveT

    DaveT Searcher of green pastures

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    I agree with this. $415m will cover the existing line to be upgraded and expanded as well as creating a new second production line.
     
  11. Benz

    Benz Active Member

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    It will be a "REAL HIGH VOLUME NEXT GENERATION" production line.

    REAL HIGH VOLUME = more than we know currently

    NEXT GENERATION = very modern / flexible / capable / efficient

    I think that it will be operational by July 2014. And it will allow them to ramp up production as soon as demand requires it. Remember that Elon Musk says: "The production of vehicles is not going to be a constraint, that's not a limiting factor."!!!!
     
  12. lolachampcar

    lolachampcar Active Member

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    OK, when's the next earnings call?????
     
  13. Benz

    Benz Active Member

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    Most likely in the second or third week of February 2014.
     
  14. uselesslogin

    uselesslogin Enthusiast

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    Well I am thinking it will be closer to Feb. 20th, the date it was last year, being that it is the last week of January and no announcement.
     
  15. Benz

    Benz Active Member

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    Elon Musk has once said that they aim to be demand constrained, and not production constrained. That's just what is going to happen in 2014. But even if they do manage to do that, I think that they will again be production constrained in 2015/2016, because they again will not be able to keep pace with demand. As by that time demand is going to increase to levels that are unbelieveable to think of today. Therefore more investments in production capacity will be inevitable, I think.
     
  16. vgrinshpun

    vgrinshpun Active Member

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    #16 vgrinshpun, Jan 27, 2014
    Last edited: Jan 27, 2014
    The filing was some time in December, so the 21,500 was the last number that TM officially guided for. I think that actual production rate at that time is not relevant as both numbers (21.5K and 35K) ostensibly come from the TM filing with California Alternative Energy and Advanced Transportation Financing Authority.

    I agree that one can choose to consider the 35K number reliable, or not. Regarding the summation, however, that is not me adding the numbers - this is how the article is written. I personally think that 35K is the real number. There was additional coloring in the LA Times article on the subject which attributed 35K increase quote to the treasurer's office report:
    The credit could help Tesla ramp up production of its Model S car by 35,000 units a year, the treasurer's office reported.

    http://www.google.com/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=3&cad=rja&ved=0CDwQFjAC&url=http%3A%2F%2Farticles.latimes.com%2Fkeyword%2Ftesla&ei=7pXmUtv6FeqvsASYsYCoDQ&usg=AFQjCNF4QNx7vOa2E5zwMcyAsz7hEJOGeg&bvm=bv.59930103,d.cWc
     

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