Reuters: Tesla Reduced Model 3 Parts Order Due to Bottlenecks

Tesla has reportedly slashed its parts order from third-party manufacturers by 40% in December citing a bottleneck in Model 3 production.

Reuters reported that Hota Industrial Manufacturing Co, a Taiwanese automotive components maker and supplier for Tesla, has been asked to reduce production of Model 3 components from 5,000 units per week in December to 3,000 per week.

Hota builds gears and axles for Tesla cars. Despite the slow-down in December, the company said its preparing for a significant ramp in Tesla’s production and plans to ship 10,000 parts a week in May or June. Tesla previously indicated it hoped to reach that mark by March.

Tesla CEO Elon Musk has been quite willing to say the company is facing production challenges, but has yet to give specifics. Some reports say bottlenecks are occurring at the Fremont factory where the Model 3 assembled, others blame suppliers. Then Musk tweeted about “production hell” from the company’s Gigafactory in Nevada, leading some to question if the bottleneck is related to the Model 3 battery pack.

It seems the company still has a long way to go before delivering on nearly half a million Model 3 reservations.

 

[zer0cool]

Given Elon timeframes, I think I would call it lucky if my car can be delivered by end-2Q (potentially when full tax credit will expire), for my 1st day order by an existing Model S owner with an original expected Oct-Dec delivery.

I think that's pretty much expected.

 

[omgwtfbyobbq]

What zer0cool said. To maximize the tax credits customers get, Tesla either needs to hit 200,000 US sales in early January, or early April. Hitting that number late in the quarter means tens of thousands of customers don't get the full credit. Because of the production bottlenecks, my guess is they'll throttle back enough to hit 200,000 in early April. While a three month delay isn't ideal, the specs we've seen on the 3 put them years (maybe even a half decade) ahead of the competition.

 

[ezevphl]

Around 3000 units per week in December doesn't sound that bad.

Of course if there are other issues and they can't hit 1000/per week, we might be in for a very long wait.

 

[VT_EE]

What zer0cool said. To maximize the tax credits customers get, Tesla either needs to hit 200,000 US sales in early January, or early April. Hitting that number late in the quarter means tens of thousands of customers don't get the full credit. Because of the production bottlenecks, my guess is they'll throttle back enough to hit 200,000 in early April. While a three month delay isn't ideal, the specs we've seen on the 3 put them years (maybe even a half decade) ahead of the competition.

This is very true. Assuming this document Tesla submitted to the EPA is legit, the model 3 specs are amazing. I am especially impressed with the insane charge rate this thing can handle. They currently have no real competition, and I don't see any other manufacturer catching up anytime soon (when taking the Supercharger network into account). These short-term delays will mean absolutely nothing next spring. I certainly wouldn't short this stock.

https://www3.epa.gov/otaq/datafiles/FOI_HTSLV00.0L13_APPIPT1.PDF

 

[run-the-joules]

Given Elon timeframes, I think I would call it lucky if my car can be delivered by end-2Q (potentially when full tax credit will expire), for my 1st day order by an existing Model S owner with an original expected Oct-Dec delivery.

I think that's pretty much expected.

I'm SLIGHTLY more optimistic than that but not by much. Not an existing owner but figuring sometime in Q2 is when I'll take delivery, compared with the "Dec-Feb" bullshit.

 

[Trips]

"Despite the slow-down in December, the company said its preparing for a significant ramp in Tesla’s production and plans to ship 10,000 parts a week in May or June. Tesla previously indicated it hoped to reach that mark by March."

This is still 6 months earlier then most people were thinking. What is the delivery time for parts like this coming from Taiwan? If they produce 3,000 per week in December, would it take a week, month, 3 months to show up in Fremont?

 

[run-the-joules]

"Despite the slow-down in December, the company said its preparing for a significant ramp in Tesla’s production and plans to ship 10,000 parts a week in May or June. Tesla previously indicated it hoped to reach that mark by March."

This is still 6 months earlier then most people were thinking. What is the delivery time for parts like this coming from Taiwan? If they produce 3,000 per week in December, would it take a week, month, 3 months to show up in Fremont?

It was about five weeks for me to ship LTL sea cargo from Melbourne, AU to Los Angeles, including a stop on the way. YMMV.

 

[Big-T]

The only thing surprising so far, is folks extrapolating based on the fact there won't be further delays. I'm sure there will be. Personally though, I need these delays to not take so long that the $7,500 federal credit gets cut in half (Model S&X deliveries are going just fine during this ramp).

If my delivery doesn't happen before the credit gets cut in half this marathon will be over for me. I won't buy the car without the full credit.

 

[omgwtfbyobbq]

One advantage of a three month delay is that someone people might be able to get the full tax credit on an AWD (and maybe performanmce?) 3.

 

[run-the-joules]

One advantage of a three month delay is that someone people might be able to get the full tax credit on an AWD (and maybe performanmce?) 3.

That's only if they roll the new configs out before they're truly ramping production. I don't think that's terribly likely.

 

[voip-ninja]

One advantage of a three month delay is that someone people might be able to get the full tax credit on an AWD (and maybe performanmce?) 3.

Only possible if they release the new configurations when they originally said they would and the current delays don't introduce delays of the newer configs.

Seems unlikely.

 

[Garlan Garner]

One advantage of a three month delay is that someone people might be able to get the full tax credit on an AWD (and maybe performanmce?) 3.

Won't fewer and fewer Model 3 owners be eligible the longer the delay takes?

Aren't the current Model S and X buyers utilizing tax credit slots as time moves forward?

 

[seattlite2004]

The only thing surprising so far, is folks extrapolating based on the fact there won't be further delays. I'm sure there will be. Personally though, I need these delays to not take so long that the $7,500 federal credit gets cut in half (Model S&X deliveries are going just fine during this ramp).

If my delivery doesn't happen before the credit gets cut in half this marathon will be over for me. I won't buy the car without the full credit.

Whenever I get the email to configure the vehicle...at that time I'll re-evaluate what is currently out in the market place and buy what makes sense at that time. Tax credits will play a part in making that decision...but other factors like brand reliability and features are higher up on the decision tree, while charging infrastructure (aint free with the model 3) will be lower in the decision tree. But, ax credits will affect the bottomline..so like you...the lack of tax credits on a Tesla might ultimately make me purchase another vehicle.

 

[omgwtfbyobbq]

Won't fewer and fewer Model 3 owners be eligible the longer the delay takes?

Aren't the current Model S and X buyers utilizing tax credit slots as time moves forward?

They are at something 4,000-5,000 US S/X sales per month. Waiting an extra 3 months would add maybe 15,000 sales, which I think was estimated to be ~150,000-160,000 Model S/X sales as of January 2018, so they shouldn't put Tesla over the limit, at least not with a 3-month delay.

 

[EdFerg]

...the lack of tax credits on a Tesla might ultimately make me purchase another vehicle.

My thoughts as well. Love Tesla, but my expectations have already been baked in regarding the tax credits. If they go away by the time I'm due to order, I'll have to step back and re-evaluate other EV's that are available, or soon to be available.

 

[Garlan Garner]

They are at something 4,000-5,000 US S/X sales per month. Waiting an extra 3 months would add maybe 15,000 sales, which I think was estimated to be ~150,000-160,000 Model S/X sales as of January 2018, so they shouldn't put Tesla over the limit, at least not with a 3-month delay.

Wouldn't that mean that 15,000 model 3 buyers won't get the tax credit? It wasn't my intention to say that the credit would be over.

 

[omgwtfbyobbq]

That's only if they roll the new configs out before they're truly ramping production. I don't think that's terribly likely.

Only possible if they release the new configurations when they originally said they would and the current delays don't introduce delays of the newer configs.

Seems unlikely.

For what it's worth, they can ramp production without ramping sales if they have enough space in Livermore. They only hit the limit with sales, so the more they can produce ahead of time, and higher the ramp rate once they hit 200k US sales, the more people get the tax credit.

Problems with the current production line/configuration could delay the AWD line, but delays in sales may not be representative of problems in production as long as they have enough storage space for the 3 in Livermore/elsewhere.

Edit - They can also deliver X cars from each batch of Y cars, and use the real world data/experience/problems from those to see if they need to fix/update anything before delivering the remainder of that batch.

Now that I'm thinking about it, that's kinda brilliant. It's a pain to have to fix a part on batches 15 and 27 sitting in a warehouse in Livermore, but it's a lot easier than scheduling replacement with owners across the US.

I've done similar in software testing, but I hadn't thought about doing it in manufacturing.

 

[run-the-joules]

For what it's worth, they can ramp production without ramping sales if they have enough space in Livermore. They only hit the limit with sales, so the more they can produce ahead of time, and higher the ramp rate once they hit 200k US sales, the more people get the tax credit.

Problems with the current production line/configuration could delay the AWD line, but delays in sales may not be representative of problems in production as long as they have enough storage space for the 3 in Livermore/elsewhere.

There's a certain logic there that I cannot deny.

What's going to irk the *sugar* out of me personally is that I don't mind giving up AWD if I get my car reasonably soon, but if I'm going to end up waiting until summer anyway (my faith in the "dec-feb" window I have right now is… very low) part of me is gonna be like "screw it, just wait a bit longer and get AWD", and then I have to expect THAT would get delayed, etc etc

 

[omgwtfbyobbq]

Wouldn't that mean that 15,000 model 3 buyers won't get the tax credit? It wasn't my intention to say that the credit would be over.

Not as far as I know. Everyone up to 200k gets the full credit. Every car after 200k in the quarter they hit 200k also gets the credit, so the more cars they can push in the same quarter the more tax credits those owners get. If they hit 200k cars in March 15th, only cars sold until the 30th get the tax credit. If they hit 200k cars on April 1st, every car sold until June 30th gets the credit.