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.

 

[stopcrazypp]

Not production, but US deliveries. Remember, they could always ship last March/June cars north of the border. (The Canadians would be happy, eh?)

Yeah, a lot of people forget that as an option (and that only US deliveries are counted).

 

[omgwtfbyobbq]

They are testing parts in cars right now. That's part of the ramp. You want them produce artificially low volumes for the next 5 months to continue to test parts?? Why stop there. Perhaps they should produce 200 cars a month for the next year to make really really sure they are reliable.

I'm not saying I think Tesla should do anything. I am speculating that they might be building more cars than they're delivering, especially during the initial ramp.

If they initially stockpile most of the cars from their production line, or lines, they can do two things they wouldn't be able to do otherwise. One is to time their 200,000th sale with more precision while still ramping production up as quickly as they can, which can help maximize the number of people who can get the tax credit. The other thing they can do is to deliver a statistically significant number of cars every 1000 (or however many) VINs, so they can get a lot of real world data and find defects before they start selling in larger numbers to the public at large, and fix most of those cars before they're delivered if they do find problems.

The disadvantages of doing this are having a lot of inventory hanging around, people waiting a few more months for their cars, and their quarterly financials looking worse than if they had made those deliveries. The advantages are being able to maximize the number of customers who get the federal tax credit, minimizing any problems with the car the public could be exposed to, and reducing the cost of most recalls/repairs.

They can also do what you thought I was talking about, throttling production, but I think that's worse than building/delivering ASAP or building ASAP/timing deliveries. My guess is that throttling deliveries will be the most beneficial in the long run if they encounter problems with ramping production and problems with parts/code/etc quality. If they can still ramp in line with Elon's estimates, and build a car that's as or more reliable than what's already on the road (eg a Prius), then they're fine and we're gonna see a ton of 3s really soon, like in the next month. That hasn't happened, but it still could.

 

[omgwtfbyobbq]

Do you really think Tesla is doing anything right now with the Tax Break in mind? I hope not. I hope they are just trying to get the cars out there.

Are they calculating the tax bread during "production hell" ?

Delivering their 200,000th US car on March 13th instead of on April 1st would hurt the bottom line of some of their buyers, and they should be (are are IMO) mindful of that.

 

[TaoJones]

US deliveries at 200K is the threshold, after which the remainder of that calendar quarter and the following calendar quarter is the timeframe in which every US delivery qualifies for the full federal tax credit.

It would be nice to see Tesla hit that 200,000th US-delivered unit on Day 1 of Quarter X just as they hit full production ramp or at least a next production ramp milestone, since then a FULL HALF-YEAR of production qualifies for the full federal tax credit (after which it is halved for a quarter and then quartered).

The degree to which Tesla manages this owner benefit will correlate directly, in my mind, to how much Tesla values their customers. The threshold and the combinations and permutations of managing the post-threshold production have been long visible - it’s not like this is a surprise.

In fact, Tesla would do well to produce a blog article full of transparent statements that clearly delineates their intended approach for this watershed event.

No, I did not bring enough for everybody.

 

[Uncle Paul]

I find it simply amazing that Elon predicted this happening, and told every one to expect it.

A year or so ago he pulled forward the target start production date ahead by over a year. Said that due to the unprescented demand and deposits received he was going to compress the development timeline to get the cars our quicker. Said that he expected several months of "Production Hell" and that is exactly what has happened. The eliminated the time consuming production of development cars to get customers their cars sooner.

Easy to stand by and critique the early results, but Elon was well aware of what he is facing, and made the decision to move things forward.

I remember Ford doing this with their original Mustang. They called it a 1964 1/2. Due to their strong need for a small and sporty car they did not want to wait until the 1995 traditional model year to bring it out.

 

[Rwolf01]

I can see Tesla fudging things by a week or two, but they aren't going to hold back months of production to delay things into Q2. Just isn't going to happen. It would totally destroy Tesla's bottom line for the quarter, for no stockholder benefit.

The way they could delay US deliveries w/o taking a cash hit would be to deliver more cars overseas in the last quarter.

 

[Ciaopec]

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.

I can understand your frustration and I don't know what your ultimate use of the vehicle will be. For me it is the ability to use a Tesla as a primary vehicle. Without a fast charging network all other BEV are just use-around-town second cars. When I read about the next great Tesla killer I chuckle because for me, unless there is a fast charging network, there is no Tesla killer. Don't know if your deliberations factor that in or not. Also, while the tax credit is great, can you really use it? I thought I had pretty high taxes but was unable to claim the full credit. Disappointing? Sure. But I also consider reduced vehicle expenses. After 16 months of driving and 58000 miles I just replaced the tires. Breakwear is non existent. No oil, filters, time in the shop, etc. Even at $0.15/Kwh I am way ahead of buying gasoline. Just a few thoughts to insure you're not making an emotional decision based on one factor.

 

[SO16]

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.

I will. That car looks much better to me than anything else in that price range. I own a Model S and will never buy a gas car again. I hate driving an ICE after driving a Tesla.

 

[Runt8]

US deliveries at 200K is the threshold, after which the remainder of that calendar quarter and the following calendar quarter is the timeframe in which every US delivery qualifies for the full federal tax credit.

It would be nice to see Tesla hit that 200,000th US-delivered unit on Day 1 of Quarter X just as they hit full production ramp or at least a next production ramp milestone, since then a FULL HALF-YEAR of production qualifies for the full federal tax credit (after which it is halved for a quarter and then quartered).

Halved for 2 quarters, and quartered for 2 quarters. Once they hit the 200,000 threshold there are 5 quarters (15 months) of federal tax credits plus whatever is left of the quarter in which the threshold was hit.

 

[AustinPowers]

All I can say is I am getting more disillusioned every day. My colleagues are making fun of me by asking every week "do you still hope to one day get your Tesla?". By now I have stopped answering.
I read an interview with Volkswagen's CEO the other day. He acknowledged Tesla's achievements but went on to say that by the time BEVs hit the roads full throttle, the established legacy automakers will use their production might and knowledge to retake the lead in that field. His prediction gets more realistic every day. VW has often been (very) late in the game yet still taken the lead in many areas. Sad, but true.

 

[run-the-joules]

All I can say is I am getting more disillusioned every day. My colleagues are making fun of me by asking every week "do you still hope to one day get your Tesla?". By now I have stopped answering.
I read an interview with Volkswagen's CEO the other day. He acknowledged Tesla's achievements but went on to say that by the time BEVs hit the roads full throttle, the established legacy automakers will use their production might and knowledge to retake the lead in that field. His prediction gets more realistic every day. VW has often been (very) late in the game yet still taken the lead in many areas. Sad, but true.

so while I'm reallllly excited for Model 3, I'm a German car snob at heart. Here's my way of looking at it:

If VW dropped an electric version of the Golf R (with a god damned moonroof, which the USDM Golf R doesn't have for some inexplicable reason), or if Audi did an electric A4 on the market with the right feature set (300 mile range, all wheel drive, adaptive cruise control with stop & go / traffic jam assist), I'd go buy it right now. I mean that literally, I'd drive to the dealership and order one (or buy off the lot if they had exactly what I wanted) today. The caveat besides those features is that they've gotta look just like the normal versions, I don't want any weird derpy "zomg electric car look at meeeeeeeeee" styling.

Autopilot (as it operates *right now*, not even with future improvements) is about 75% of the reason I'm buying a Tesla specifically. My commute isn't even bad by a lot of standards (about 11 miles, takes me ~35 minutes on the freeway in normal traffic), but it's just enough to me affecting my quality of life because I *hate* sitting in traffic. I'm fine when the car is handling most of the stuff, even if I have to pay attention, but something about the whole "Ok we're moving, hit the throttle. Nevermind, hit the brake" monotony just makes me die inside. When I did the extended test drive experience with the Model S, my stress level was dramatically lower, and to be honest if the Model 3 hadn't been announced/revealed/etc at that point I might have talked myself into buying an S…

The remaining reasons I'm getting a Tesla are (roughly):
5% continuous improvement / OTA updates,
5% supercharger network,
5% performance (it doesn't have to be FASTER than my current car [0-60 in a bit under 6], but it's not allowed to be slower. Always be advancing!),
5% looks/styling
and about 5% for general EV stuff that aren't tesla-specific: "full tank" in the morning, lower maint (in theory), less noise.

So for me, the Germans don't actually even have to work that hard (on a conceptual level) to get my business!

 

[vinnie97]

Buncha quitters. I was right to expect these cars wouldn't be ready until 2018. When I stood in line, that was my expectation.

 

[gregincal]

All I can say is I am getting more disillusioned every day. My colleagues are making fun of me by asking every week "do you still hope to one day get your Tesla?". By now I have stopped answering.
I read an interview with Volkswagen's CEO the other day. He acknowledged Tesla's achievements but went on to say that by the time BEVs hit the roads full throttle, the established legacy automakers will use their production might and knowledge to retake the lead in that field. His prediction gets more realistic every day. VW has often been (very) late in the game yet still taken the lead in many areas. Sad, but true.

I'm waiting for any of them to announce concrete plans for a compelling all electric sports sedan. They seem to promise hatchbacks, crossovers and weirdmobiles. Volkswagen laughably says the I.D. will compete with the Model 3. Right along with the BMW i3 I suppose. They might yet take the lead years from now, but I would make even more fun of anybody waiting for an all electric 3 series or A4. I want my car now, and a couple months extra wait is a hell of a lot better than waiting years for even an announcement.

 

[Big Dog]

So for me, the Germans don't actually even have to work that hard (on a conceptual level) to get my business!

Actually, they do have to work hard. The problem for all ICE manufacturers is canibalizing existing profits, which in the US is Service and support (~50% of a dealerships' money).

 

[run-the-joules]

Actually, they do have to work hard. The problem for all ICE manufacturers is canibalizing existing profits, which in the US is Service and support (~50% of a dealerships' money).

hence the "on a conceptual level" part. Unlike a lot of the people here, I'm not going to take some moral stand about the diesel cheating supporting local business or anything like that. They just need to make a product I want to buy, and I'll throw money at them.

 

[run-the-joules]

I'm waiting for any of them to announce concrete plans for a compelling all electric sports sedan. They seem to promise hatchbacks, crossovers and weirdmobiles. Volkswagen laughably says the I.D. will compete with the Model 3. Right along with the BMW i3 I suppose. They might yet take the lead years from now, but I would make even more fun of anybody waiting for an all electric 3 series or A4. I want my car now, and a couple months extra wait is a hell of a lot better than waiting years for even an announcement.

*exactly*

I'm ok with hatchbacks if they're tasteful (e.g., Golf, Scirocco), but I'm not buying a weirdo derp pod, and sure as hell not buying a crossover or SUV.

 

[gregincal]

*exactly*

I'm ok with hatchbacks if they're tasteful (e.g., Golf, Scirocco), but I'm not buying a weirdo derp pod, and sure as hell not buying a crossover or SUV.

I'm not opposed to hatchbacks either, although I think the Golf is a bit too boring. However, if Audi made a 250 mile range sub 6 second 0-60 all electric A3 etron I'd certainly consider it (my car before my Model S was an A3 hatchback and my very first car was a Golf GTI).

 

[run-the-joules]

I'm not opposed to hatchbacks either, although I think the Golf is a bit too boring. However, if Audi made a 250 mile range sub 6 second 0-60 all electric A3 etron I'd certainly consider it (my car before my Model S was an A3 hatchback and my very first car was a Golf GTI).

Yup. Just can’t be front wheel drive. A man must have standards.

 

[jsrawa]

All I can say is I am getting more disillusioned every day. My colleagues are making fun of me by asking every week "do you still hope to one day get your Tesla?". By now I have stopped answering.
I read an interview with Volkswagen's CEO the other day. He acknowledged Tesla's achievements but went on to say that by the time BEVs hit the roads full throttle, the established legacy automakers will use their production might and knowledge to retake the lead in that field. His prediction gets more realistic every day. VW has often been (very) late in the game yet still taken the lead in many areas. Sad, but true.

I agree and every day that passes is another day the competitor can narrow the lead! I knew their projections were optimistic but I think we all are going to be waiting a while for our cars. I don’t think many will end up with the full rebate at this rate.

 

[gregincal]

I agree and every day that passes is another day the competitor can narrow the lead! I knew their projections were optimistic but I think we all are going to be waiting a while for our cars. I don’t think many will end up with the full rebate at this rate.

Except none of them are selling cars that compete with the Model 3. I suppose they could narrow the lead, but they aren’t. As much difficulty as Tesla is having with the Model 3, I still feel much better waiting for the Model 3 than waiting for any other car manufacturer to make a car I’m interested in.