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Gigafactory in 2020, Model 3 in 2017, Timing ?

Discussion in 'Tesla Motors' started by Evbwcaer, Jul 24, 2014.

  1. Evbwcaer

    Evbwcaer Member

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    As I understood it, a large part of the cost reductions for the Model 3 is in the battery. If the Model 3 comes out before the Gigafactory is operational, how does Tesla reach the price targets for the Model 3? Additionally, could prices drop even more once Gigafactory is operational.

    Thoughts?
     
  2. ItsNotAboutTheMoney

    ItsNotAboutTheMoney Active Member

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    Running at full capacity in 2020 not open in 2020?

    Economies of scale come from rapid repayment of capital costs, reduced per-unit overhead and recursively the same through bulk purchase from suppliers.

    Tesla can get some of that ahead of full operation by virtue of the contracts they make with suppliers.

    Possible, since Tesla has a target gross margin for Gen 3 of around 10%-11%, but I suspect they'd rather do something else. Elon Musk has already mentioned a cheaper Gen 4 after Gen 3 and I'd suggest it's only once they're at an identified "bottom" like the Gen 4 where they'd consider cutting those prices to expand the market. If they did anything nice in response to favorable margins on the Gen 3, I'd suggest it'd be to increase the base spec.
     
  3. CHGolferJim

    CHGolferJim Member

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    Part of the price reduction will come from fewer options, and lower markup on options, and they may have to assume a not yet realized standard cost for batteries to meet the target price point. A business risk, but then so would over-pricing based on then current costs be.
     
  4. evme

    evme Member

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    The gigafactory will be operational in 2016 or 2017. It just won't be in full operation till 2020. Hence why Musk said that the gigafactory will drop prices by 30%, 40% once fully operational.

    Overall though, even if they don't have economies of scale when they go live, they can always sell the car at break even and secure their profit margins once operations increase. Same thing they did with the Model S, first year they were losing money until they got production up. And now they got 25% gross profit margins.
     
  5. Vger

    Vger Active Member

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    Also, Tesla has indicated the Model 3 will not be at peak production levels to begin will. The market may develop quickly, but not instantaneously. They get that. Production of 100,000 cars in the first year and maybe 200,000 in the second does not require a fully scaled-up gigafactory in 2017.
     
  6. RobStark

    RobStark Active Member

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    About 9 months ago Elon said on camera Gen3 GM goal was 14%. Has he revised it down recently ?


    BTW GF opens in 2017 reduces battery cost by at least 30% and is fully operational by 2020 and reduces cost by ~40%.

    Reducing cost via long term contracts with mining companies vs spot metals market,economies of scale, and reduced shipping cost.

    All the suppliers will be in one physical location(instead of shipping components to each other) and shipping the finished battery cells will be much shorter via rail instead of shipping from Japan.
     
  7. Red Sage

    Red Sage The Cybernetic Samurai

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    Panasonic has the ability to supply a lot more batteries to Tesla Motors than they have so far committed to contractually. They can certainly provide enough batteries to cover Tesla Model S and Tesla Model X production. Tesla Model ☰ production will match, then surpass the other two in short order. Panasonic should be able to provide enough batteries to cover the initial ramp-up for Model ☰ production to fill in the gaps while the Gigafactory is brought up to full capacity. Since they are now 'all in' on the Gigafactory, there is no reason to presume Panasonic won't be willing to do all they can to ensure the Model ☰ is a success as soon as possible.
     
  8. NigelM

    NigelM Recovering Member

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    Please leave out the random use of bold; makes your posts very difficult to read on smartphones.

    BTW, Tesla calls it "Model 3"; I'm not sure why folks keep writing the 3 lines thing.
     
  9. Cosmacelf

    Cosmacelf Active Member

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    Gigafactory is needed for Model 3 launch. That 2020 date is for full gigafactory output. Model 3 sales won't instantly ramp to 500,000 cars annually, it'll take a while, so the thought is Model 3 sales will ramp along with gigafactory output. Also Tesla has said they expect to still buy cells from other factories even after gigafactory # 1 is operational.

    All these statements are fluid though. It all depends on current market conditions, operational readiness, etc. For instance, it is possible that Tesla decided to plan for a second and third gigafactory after they announced plans for the first. As evidenced by their fund raising, they assess conditions on the ground very quickly and make decisions/change course very quickly.
     
  10. green1

    green1 Active Member

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    I am shocked that people keep repeating the timelines Tesla has given for the gigafactory, and for the model 3 car as if they are in any way likely to come true. I can basically guarantee that neither one will be the case. Tesla is chronically late with their products, and these will be similar. remember, gigafactory broke ground last month, the chadmeo adapter was available a year ago, the model x will ship last year, the centre console will be available a year ago, etc etc.

    Gigafactory hasn't broken ground yet (no matter what people say about various construction projects, I have trouble believing that Tesla would miss the PR opportunity of a ground breaking!) A factory like that takes time to build and outfit, it won't be finished and producing batteries by 2016-2017. As for model 3 they haven't even shown off an artist's rendering yet, and again, these take time.

    If I had to make a reasonable guess on timelines, I'm going to say gigafactory and model 3 together in 2018 but that counts on a lot of things going right, so the timeline could yet slip further.

    Somewhat off topic, but it's because Elon specifically stated that it would be represented by 3 lines, people have been assuming three horizontal lines instead of 3 vertical ones, but nowhere has anyone at Tesla indicated the orientation of said lines.
     
  11. RobStark

    RobStark Active Member

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    I assume expertise and cumulative knowledge will increase at Tesla. They will suck less at manufacturing the Model 3 vs the Roadster and they will get better at making and meeting timeline goals. They certainly have for delivery guidance.If they execute like a rookie car company forever TSLA is in trouble. And Elon keeps re-emphasizing 2017.

    The horizontal lines matches the Tesla logo and keeps the "S E X" acronym without infringing on Ford trademarks. Seems like that is the way to go.
     
  12. Red Sage

    Red Sage The Cybernetic Samurai

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    #12 Red Sage, Jul 26, 2014
    Last edited: Jul 26, 2014
    I'm operating on the information that is before me. I know there have been delays. I also see a clear path by which the timescale will be greatly contracted.

    Panasonic finally agreed to be part of the Gigafactory. Tesla Motors has, I hope, already proven to all their manufacturing partners that they are seriously in the automobile business. This isn't a fly-by-night company. This isn't an attempt to play chicken with other auto manufacturers. This isn't a Ponzi scheme or stock market scam. All the checks clear, and there is plenty of cash in the bank. Much of their gross profit is reinvested in the company itself for the sake of expansion.

    Of these, Panasonic was the hardest nut to crack. They were being cautious, careful, and very conservative. They wanted to go slow... and... easy... Panasonic wanted to wait... and... see... I think they finally realize they have simply been holding Tesla Motors back from reaching the goals they've set for themselves. They saw Tesla's expansion as being risky before. I hope they now see it as necessary to the survival of the company and will aid it to the best of their ability from here on in.

    Here is what my Cybernetic Crystal Ball tells me:

    • Still a little fuzzy... But it looks like the Model ☰ will appear at the North American Auto Show in Detroit in January 2015. Surprise! Three configurations of the new vehicle will be displayed (Sedan, Crossover, Wagon, Minivan, Coupe...) and reservations will open on the Tesla Motors website.
    • Model X will be a tremendous success, ultimately selling at a 3:1 ratio compared to Model S.
    • Model S will continue to dominate its market segment in North America, but will be limited to 50,000 units worldwide, with 20,000 to 25,000 of those sold in the US.
    • Expansion of capacity at Fremont will continue ahead of production, so that the facility is capable of 100,000 units by 3rd Quarter 2015.
    • Maximum capacity of Model S and Model X will be reached in 2016, everything beyond that will be in preparation for Model , as the facility is expanded to handle 200,000 units per year.
    • Model ☰ will appear with ordering options in the Tesla Motors Design studio, just after test drives begin at Tesla Stores early in 3rd Quarter 2015. 50,000+ orders will be placed in the first two days. Projected delivery for Signature will begin 4th Quarter 2016, everyone else may be delayed to mid-2017.
    • TSLA crests $500 for the first time. Jim Cramer's head explodes on live television, reminding many of a scene from 'SCANNERS' (1981).

    Precisely. The symbol has the benefit of standing for: the numeral three, the phrase 'equivalent to', or the word 'heaven'. It also looks like the letter 'E' from the Tesla logo.
    View attachment 54796

    [TWIMC: I use bold, underline, and italics for their intended purposes, which is to give emphasis to specific terms and phrases.]
     
  13. Doug_G

    Doug_G Lead Moderator

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    You're seriously overdoing it.
     
  14. Red Sage

    Red Sage The Cybernetic Samurai

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    ok. i'll try to talk real quiet, then.
     
  15. DaveT

    DaveT Searcher of green pastures

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    Can you point me to where he said that? Also are you sure he said gross margin and not operating margin?
     
  16. Benz

    Benz Active Member

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    @ Red Sage

    "Panasonic finally agreed to be part of the Gigafactory."

    I know that Panasonic has signed a Letter of Intent, but nothing after that. Have I missed something? Tell me about it.
     
  17. dsm363

    dsm363 Roadster + Sig Model S

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    Thank you. Look at all the other posts on here. You'll find maybe a single word bolded for emphasis in multiple paragraphs.
     
  18. bonaire

    bonaire Active Member

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    You need to realize they have a 660 million dollar bond to repay in 2018. They need profits enough to pay that back by that time. Running at break even is not happening now (on a GAAP basis) so they may not have the liberty to do that with Model III. They could push Panasonic for a huge order going into late 2016 and get some price breaks as part of this 2 billion cell order that they inked last year through 2017. Money needs to be spent to get ready for new assembly,lines and all that. All happening just prior to 2018 when bonds will need to be repaid. The same bonds used to pay off the Doe loan "9 years early".
     
  19. ItsNotAboutTheMoney

    ItsNotAboutTheMoney Active Member

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    I'd suggest that Model 3 doesn't have to follow the chronic lateness model because it'll not have the same level of dependency on complex engineering. The Model X has the stupid falcon wing doors and 4WD and they have to be absolutely right. Model 3 won't innovate on anything exceot cheap.

    - - - Updated - - -

    They have non-GAAP profit and that's all that matters because suppliers don't refuse money because Tesla has potential lease liabilities.
     
  20. RobStark

    RobStark Active Member

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    I am not 100% sure he said gross or operating but did say 14%.

    I think it was during a bloomberg interview. I am not going to look through all the youtube vids looking for it.

    He talked about taking lower margins in order to increase volume vs Model S.
     

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