Confirmed - Production ramp of 5,000/week delayed until late Q1 2018

[SageBrush]

Next milestone: When Elon decamps from the Gigafactory roof.

 

[Garlan Garner]

That is the #1 concern anyone waiting on a car should have... if they burn through all of their cash with month after month of negative cash flow eventually they are back at the trough begging for more capital or they are going to go belly up.

Borrowing money at very high interest rates is a huge gamble that people around here seem ready to give them a pass on.

I believe for their current debt the interest payments alone are something like $100M a month.

WOW....that's a lot of cash.

 

[kengchang]

I believe for their current debt the interest payments alone are something like $100M a month.

It was 117 millions last quarter, you are way off.

 

[JonathanD]

Delay is not disaster. Product defects, especially safety-related, would be far worse, and could threaten the integrity of the brand. For now, this is a schedule push, which is typical modus operandi for a Musk operation: set often unattainable timelines and endeavor to be as little late on them as you can. One can argue the wisdom or lack thereof in that approach, but it's certainly not something new.

 

[MogWV]

They are blaming this in the supplier/contractor who built the Giga-2 plant systems but that's complete obfuscation. It's Tesla's job to validate everything that supplier was doing, so if they weren't ready Tesla should have known about it months ago, not a few weeks ago.

FWIW, Musk/Tesla did take ownership of the problem on the conference call:

Elon Reeve Musk - Tesla, Inc.

Yeah. I think, first of all, I think at the end of the day, everything is our fault – and my fault most of all. If we pick the wrong subcontractor, we're the fault. So, I don't want to – just to be externalizing responsibility, really it's our fault for picking the wrong supplier and then not realizing it until way late in the game.

 

[electracity]

So _that's_ why Elon Musk's predictions always differ so much from reality. I thought he meant something different when he talked about the complexity of production. But now I understand I realize that when he talks about a rate of 10,000 per week by the end of 2018, he actually means |rate| = 10000.

Exactly.
But seriously, I expect the ramp to be more linear than exponential. The long model S ramp was overall linear-ish.

The equipment and design of model 3 production would produce an exponential curve at an established car company. But too many new ideas combined with a rushed schedule that is executed by a lot of people who have not worked together is unlikely to produce a good launch.

500 cars per week through the paintshop today. 5400 cars per week through the paintshop in March '18. I doubt it.

I would like to be wrong, however. A jump in production would be great.

 

[SageBrush]

Does anybody know if the module assembly problem at the Gigafactory would also affect Powerpack production ? I'm wondering about the Australia wager.

 

[MogWV]

Does anybody know if the module assembly problem at the Gigafactory would also affect Powerpack production ? I'm wondering about the Australia wager.

No- the Powerpacks in Australia are not using the 2170 cells made in Nevada, and there would be entirely different machinery responsible for assembling cells into Powerpacks regardless.

 

[electracity]

I thought Australia was finished?

Edit:
Musk says Tesla big battery now more than 80% complete

 

[Trips]

I think the argument is that getting a larger rebate yields better value, as the LR option depreciates based on its pre-rebate price. On a 2 year ownership the difference in rebate may be higher than depreciation of the LR option, so you end up driving a better car and come ahead financially (you spend $5K more up front, but your 2 year residual is >$5K higher).

Yes, I do not think the LR is worth $9,000 extra. If the option is to get a LR with $7,500 rebate or a SR with $3,7500 rebate that only makes the upgrade a $5,250 difference. I was originally planning on getting the Dual Motors but just like this situation, if I lose $3,750 tax credit + paying $4,500ish for the extra motor I do not think it is worth $8,250.

 

[internalaudit]

Tesla should raise via secondary offering. Dilution will almost always better if they can turn things around and their stock price is a healthy $300 anyway.

Having creditors breathing down a corporation's neck is a no-no.

 

[voip-ninja]

It was 117 millions last quarter, you are way off.

Fair enough. So about 40 million a month. I apparently read quarter as month. It is still a huge amount to be paying just in interest. They are bleeding a ton of cash.

 

[bhsu90]

It was 117 millions last quarter, you are way off.

Hah, you're both off - $117M is GAAP - of which more than 50% was Non-cash interest expense ($62.7M) due to the "interest expense" related to converts. Real cash interest outlay is much less.

All the goodies are in the footnotes - it's almost pointless to read a PnL without them

 

[avoigt]

Exactly.
But seriously, I expect the ramp to be more linear than exponential. The long model S ramp was overall linear-ish.

The equipment and design of model 3 production would produce an exponential curve at an established car company. But too many new ideas combined with a rushed schedule that is executed by a lot of people who have not worked together is unlikely to produce a good launch.

500 cars per week through the paintshop today. 5400 cars per week through the paintshop in March '18. I doubt it.

I would like to be wrong, however. A jump in production would be great.

As management pointed out yesterday in the call and in the previous Q2 call the production process designed for M3 is very much different from MS and MX due to the hight automation with almost no manual work. Having a line where humans work is likely more a linear ramp and can be improved step by step over time versus a highly automated one like for the M3.

Once the Kuka robots are calibrated and synchronized you can increase the speed almost instantly without any steps. Needless to say that all needs to be perfect but thats exactly what they are working for. As long as they are not calibrated, the line stands still and given that they have not spared the space they can't even take the M3 out of the line, do the required steps manually and phase it in later. Thats why we have seen such a small number of deliveries. The design of the line does not allow them to.

In other words one day you have 100 per week and a week later its 2000 and if all is fine you jump to 5k. Thats what Elon mend with unpredictability.

That very high degree of automation is unique in the industry and therefore declared a game changer and huge competitive edge. The Kuka robots are made partly out of carbon because if it was steel at that high speed the momentum would make the robots simply destroy themselves given the speed and weight. Cant wait to see a video of them running next year. Today that does not exists anywhere.

At the end of the day you utilize the same investment with an unprecedented output and create a not seen productivity and GM. This is one of the reasons why Tesla is heavily undervalued - the market does not really comprehend what is happening here....

 

[azdryheat]

I hope Tesla won't need any more capital.

The longer they don't produce model 3 at a mass rate.....they are eating up their capital at a tremendous rate.

They will almost certainly need more capital. Question is when. I don't see Tesla out of cash flow issues for probably 24 months. I also think most investors know this even though Elon does not want to admit it.
In many ways, he is brilliant. In other areas, he should hire someone.

 

[Garlan Garner]

They will almost certainly need more capital. Question is when. I don't see Tesla out of cash flow issues for probably 24 months. I also think most investors know this even though Elon does not want to admit it.
In many ways, he is brilliant. In other areas, he should hire someone.

May I suggest he hire a production publicist.

 

[mond81]

My estimates moved from (oct-dec 2017)(jan-mar 2018) for the LR and SR...to (nov 2017-jan 2018)(early 2018). Non-owner, CA, very early reservation.

It's interesting they don't even give a month range for the SR. Just "Early 2018"...I doubt if I were going for LR I'd even see it before Spring, SR probably lucky by next summer...hah.

What about the rumors of them 'purposely' delaying deliveries to maximized the tax credits? Could it be that? I doubt it but...who knows.

 

[RenMan68]

My estimate moved from Dec-Feb to Jan-Mar. Non-owner, reserved on 3/31/16. If it's only pushed back one month then no big deal but, as someone wrote previously, the first delay is not usually the last. However, on the bright side, pushing back one month when it's only two months away is better than a one-month pushback two years from now in the sense that the closer the proposed timeline is the more accurate their delay estimate should be. We'll see. By the way, how do I "like" posts on this forum? Can't seem to figure that out...

 

[Vic4Model3]

My expected delivery date went from oct-Dec to nov-jan. Current SJ CA owner .

 

[JonathanD]

By the way, how do I "like" posts on this forum? Can't seem to figure that out...

See those little faded icons in the lower right of each post? If you hover your mouse over them they say what each rating is.