Discussion of New Platform for Model Y

[electracity]

They really need to do an update to the S soon... at least on the interior... to make the extra money more worth it. I also think that once the federal tax credit goes away the Model S will be able to be $10,000 cheaper due to economies of scale with the 2170s once they use them in the Model S and X.

Tesla will probably sell a lot of model S in the U.S. when the tax credit is due to expire. I expect part of Musk reasoning for producing a lot of P100D for service centers is because of falling demand followed by a surge next year. He knows he can unload the cars, so the factory may as well not slow down. They will likely build a lot of inventory cars for the rush.

AP2 was suppose to be the demand driver for S/X leading into the model 3. Musk chose to ignore reality and went ahead with selling FSD. Jim Cramer was right this week in saying that shorts need to fear Musk's wizard skills.

 

[30seconds]

It surprised me when I read this, and, to be honest, I have to question this a bit. They have spent a few billion dollars developing the Model 3 platform and building out the production line. They are currently developing platforms for the semi and the pickup as well as needing to build out production lines for both of those vehicles, each of which is a multi-billion dollar investment. On top of this, they want to build yet another platform? Oh, and somewhere in where, the Model S is due for a refresh.

At some point, I gotta wonder where all this money is going to come from. From a purely engineering perspective, probably there is an oppty to further optimize the Model 3 platform for the Model Y, but will it be in a way that an owner will notice/care? Can you really not leverage the Model 3 platform and get more than a couple of years out of that investment and is there really another better you can be dong with that money?

This year they will do something like $13B in revenue, likely jumping to something like $25B next year. The Model S refresh costs wont even be visible from that perspective. The new platform costs will be spread out over multiple years with the majority of the costs at the end for production equipment and tooling - for instance what ever they spent on the Model 3 wasn't really visible until the last two to three quarters (sometime in 2019 for the Y).

Plus the semi will be a substantially lower volume product and use components from the 3.

Two new GFs at $4B each will be a more visible cost to the P&L.

 

[omarsultan]

I am all for disruption, but its not like it happens with costs and introduces risk. I trust Elon, so I assume the payoff is worth it. BTW, Apple is actually a poor example as they re-use their physical form factors across generations (iPhone, iPad, MacBookPro, Apple Watch), even if the completely swap out the insides.

 

[FrozenCanuck]

Don't forget that Elon mentioned that they will be using a lot of Model 3 components for the Semi, which I found super interesting. So if Semi becomes a hit, they will likely be already maxing out Model 3 components for both the model 3 and the Semi. (So in a sense the Semi could be to Model 3 like X is to S...and we all thought Y would be to 3)

So in that sense it does make sense to me that they would consider a whole new set up for Model Y. Production constrained again...

This is not a legitimate explanation for a new platform. It would be much easier to scale component production versus design new components.

Well if it all works out, it will be great. But didn't the risk of going broke just go up? Surely a new platform and factory is going to cost billions.

I think they'd need a new manufacturing line regardless simply because Model 3 volume is expected to be 500k per year, and I don't think it's common to produce more cars than this on a single line, is it? Even the NUMMI plant made less than 500k cars prior to Tesla owning it.

 

[FrozenCanuck]

Just reading all the replies here ... and I think @jbcarioca brings up a good point about the supply chain for 12V components. Tesla hasn't been large enough, until recently, to swing its weight around. Once they prove themselves with a Model 3 ramp, if they call up a supplier and say "Hey, we need you to make this component for a new voltage level ... otherwise we're not doing business with you anymore!", the supplier will do exactly as asked. Previously? They'd just say no or ask for a huge NRE fee.

Tesla is becoming a big boy. They'll be able to tell the supply chain exactly what they want in terms of electronics. I remember when RIM (BlackBerry) achieved this status (well before Apple crushed them). It was a game changer for their business. Same will happen for Tesla.

 

[omarsultan]

I think they'd need a new manufacturing line regardless simply because Model 3 volume is expected to be 500k per year, and I don't think it's common to produce more cars than this on a single line, is it? Even the NUMMI plant made less than 500k cars prior to Tesla owning it.

So, in a conversation with one of their VPs, he noted that one of their scaling advantages came form the use of robots. When other companies add lines, they need to train an entire new workforce, while with Tesla, all they need to do is transfer the programming from the robots on the original line, so this approach undermines that.

 

[electracity]

Tesla has purchased more buildings around the Fremont plant, so 600,000 total production may be reasonable.

Non-US sales for the M3 is a bit of a head scratcher long term. Presumably they won't be able to produce the Fremont Model 3 in the new gigafactories. They will need to design a sedan/hatchback they can produce on the automated lines.

 

[erthquake]

Tesla will probably sell a lot of model S in the U.S. when the tax credit is due to expire. I expect part of Musk reasoning for producing a lot of P100D for service centers is because of falling demand followed by a surge next year. He knows he can unload the cars, so the factory may as well not slow down. They will likely build a lot of inventory cars for the rush.

This is an excellent insight that I had not thought of. Thanks!

 

[Reciprocity]

Tesla will probably sell a lot of model S in the U.S. when the tax credit is due to expire. I expect part of Musk reasoning for producing a lot of P100D for service centers is because of falling demand followed by a surge next year. He knows he can unload the cars, so the factory may as well not slow down. They will likely build a lot of inventory cars for the rush.

This is brilliant, how has this not been put out there more. We have been so focused on the end of tax credits for Model 3. I was actually thinking about how the credit expiring would impact used cars by increasing their value almost overnight, the day after credits are gone. And that will happen over a few quarters so you could see a situation where your car actually does not lose much value in 2018. Newer cars will lose more of their value as they always do, but a 2016 Tesla could be worth as much on Jan 1, 2019 as it was on Jan 1, 2018 because the relative value to a new Tesla will have went up in value by $7500 during the year as credits expire.

I wonder how much demand will spike. A lift of 20-30 percent would be astounding. I also think more people in the market are used to buying cars off a car lot then custom ordering, so they are fine with browsing whats available and purchasing whats there or even getting a car that is closer to what they want from another nearby lot and having it shipped or going to pick it up.

 

[Snapdragon III]

I did not come up with this idea myself, someone else on TMC brought it up, but I am really taken with the idea that the new model Y line could potentially be designed to build all of the different models of cars on the same line. It would solve huge logistical problems of having a super fast line making way too many of one model of cars in one part of the world, and then having to ship them all over, and pay tariffs. If all the gigafactory's could build all the cars on the same line, they could easily adjust the product mix to whatever was optimal in each market.
The new line could start with the model Y, then model 3 wiring, components, etc, could be changed over and added to it, then the same for the model S, X, roadster, truck, etc. Once they do it the first time, all the programing and tooling gets sent to each additional line, and if they need more capacity in a certain part of the world, they just add another gigafactory. Of coarse this would be a monumental tooling and programing challenge, but it doesn't seem like it would be first principles impossible. If it worked, it would be very hard for other companies to compete with. It would also help explain why they seem to be stopping investment in raising production of the model S and X for the time being. If they know that it will be completely revamped, and built on the new line in a couple years, why spend more time and money improving the current process, that you know is a dead end? Maybe what Elon is not telling us, when he said Model Y will be a new platform, is that all the models will be moved to that new platform with it?

 

[SwTslaGrl]

I made a schematic sketch of Model Y going through the assembly line. It's like a flat circuit board with robots mounting components. All at a huge speed.

In the end the sides are folded up and glued/riveted together, similar to how a rocket or airplane is put together.