Tesla cancels contract with Model 3 supplier = delayed launch?

[daniel]

We also went from a Prius to Tesla, with another electric in the stable for about 3 years:

My wife drive a 2007 Prius to 170k miles before we got her Model S this year
I have a Roadster with 70k miles
My older kids both drove a 2009 Zenn (think "refined" Zap with 4 wheels) during high school

A fellow I knew had a Zenn. It was a better car than my Xebra in every respect except one: The Zenn was a good solid boring NEV. The Xebra was fun. (I'd have kept it if it hadn't been so dreadfully under-powered.)

... every day that the Model 3 isn't ready to be test driven or sold is a day that the reservation holders will, in many cases, decide to go with an alternative.

If and when there are delays (which I think is quite possible) this may be the case. But at present the Model 3 seems to be still on track. Everyone who placed a reservation knew, or should have known, that production would not start until late this year, and unless you are an early reservation holder you probably won't get the car until 2018. Anyone who cancels right now because they're tired of waiting probably wasn't all that interested in the first place because it's not scheduled to be ready for nearly a year. And nobody has cars to test drive a year before they're available for sale. Some people will just change their minds. But it's worthy of ridicule if someone cancels just because they think the news of the contract cancelation means a significant delay in production.

 

[Sonny Daze]

...one of Elon's strong points is his dedication to quality.

I wish that statement was true. That is, by far, my biggest concern when it comes to buying a Tesla, which is why I'm glad to see this story. Hopefully they have learned from the initial roll out of the X. I don't care if it's delayed, I want it done right.

 

[AnxietyRanger]

There is so little available in large-battery EVs that none of the normal rules of car segments and usual allegiances matter much. If you want an EV (and we agree many do), you have to compromise with a limited selection.

People are coming to Teslas from very low and very high (like from Priueses and OTOH from far more luxurious cars). And likely they will do the same with Bolt, especially those coming from lower end of the spectrum.

This will normalize once there is more options out there, but as long as there are only a few large-battery EVs on the market, people are forced to look outside their usual buying segments.

Heck, I have given Bolt's Euro version some thought (the Opel Ampera-E) as a second car, and I'm not in the market for an Opel usually at all.

As for the topic itself, if the Model X delays and pre-launch leaks taught us anything, Tesla's scheduling and their ability to work their supplier network certainly can lead to issues. Model X was delayed by many things similar to this thread topic - especially its volumes, which ramped up super-slow oper the course of some 9-12 months (and it was of course already a couple of years late before that). Supplier issues and relationships gone sour was one of the reasons there too (e.g. door issues/changes/change of suppliers)...

Model 3 will be simpler to make but still it is interesting to see how fast or slow its ramp-up will be.

 

[AnxietyRanger]

I wish that statement was true. That is, by far, my biggest concern when it comes to buying a Tesla, which is why I'm glad to see this story. Hopefully they have learned from the initial roll out of the X. I don't care if it's delayed, I want done right.

Yeah, one has to admit, Teslas do have a lot of quality issues.

 

[stopcrazypp]

I'm actually saying things based on Tesla's track record and the fact that the Bolt actually exists. 400,000 reservations is great, but if you can't build those cars the reservations will mean nothing.

As an example, my cousin reserved a Model 3. She's now tired of waiting to see what the production version will look like (especially the interior) and asked me what I thought of the Bolt. I told her that I drove the Bolt and think it's a really nice EV, and maybe one day the Model 3 will be available (and the type of car she wants), but at this point the Bolt is the better option if she wants a new car that is a smaller EV.

She cancelled her Model 3 reservation and ordered a Bolt.

The Tesla faithful won't switch like she did, but the Model 3 is intended to be a car that appeals to a much wider audience than the core Tesla fans. So every day that the Model 3 isn't ready to be test driven or sold is a day that the reservation holders will, in many cases, decide to go with an alternative.

Again, my point already addresses delays and comes with pessimistic assumptions about cancellations and production rate. And even in that scenario, the Model 3 volume will be on a whole other level.

To make things clear, the Model X was delayed 1.5-2 years (promised early 2014 at launch, actual release in September 2015). Over that period they got ~27000 cumulative reservations and ~4000 cancellations. That works out to about a 15% cancellation rate.
Tesla has over 24,000 Model X reservations, twice as much as they had for the Model S

I was assuming a 50% cancellation rate (which is highly unlikely). Even if the Bolt was able to get a 100% conversion rate from Model 3 reservation holders, the effect would be about 30-50k cancellations per year (7.5-12.5%) not anywhere near enough to tip the scales, especially considering Tesla is holding off on demand levers at the moment that can easily boost the numbers (just releasing some details would be enough to drive up demand).

 

[Canuck]

As an example, my cousin reserved a Model 3. She's now tired of waiting to see what the production version will look like (especially the interior) and asked me what I thought of the Bolt. I told her that I drove the Bolt and think it's a really nice EV, and maybe one day the Model 3 will be available (and the type of car she wants), but at this point the Bolt is the better option if she wants a new car that is a smaller EV.

She cancelled her Model 3 reservation and ordered a Bolt.

The Tesla faithful won't switch like she did, but the Model 3 is intended to be a car that appeals to a much wider audience than the core Tesla fans. So every day that the Model 3 isn't ready to be test driven or sold is a day that the reservation holders will, in many cases, decide to go with an alternative.

I wish the Bolt all the success in the world but in my view if you show Tesla reservation holders (and not just "the hardcore Tesla fans" to use your words) a picture of a Bolt, 99% of them will discount it solely on looks despite how great it might be otherwise. Your cousin, in my view, is in the 1% (actually, it's probably less than that).

You are not going to get the vast majority of people to pay what it costs to buy a Bolt since they end up with a car that looks like a $15k at most econobox, at least in my view. You've completely misjudged the 400k reservation holders if you think any more than a very few will jump ship for the Bolt, as opposed to waiting longer than expected for an extremely aesthetically pleasing looking vehicle in the Model 3. Looks rule in our society -- it's form over function and availability for the vast majority of people, again all in my opinion.

 

[brucet999]

As for the news, plenty of people in the article already pointed out that a supplier can be easily replaced and it's unlikely

If it's easy to replace a supplier, why are Takata airbags still being installed by Fiat Chrysler, Mitsubishi, Toyota and Volkswagen?

 

[Canuck]

If it's easy to replace a supplier, why are Takata airbags still being installed by Fiat Chrysler, Mitsubishi, Toyota and Volkswagen?

Some are -- like Honda and Toyota.

But it's a completely different issue with a recall because the automaker is on the hook to the customer but can claim indemnification from the supplier. If you dump the supplier, and they go under, then the automaker is on the hook for all costs and won't be able to recover anything. So that's not always a smart move.

 

[brucet999]

What is an axle-drive pump, anyway?

 

[stopcrazypp]

If it's easy to replace a supplier, why are Takata airbags still being installed by Fiat Chrysler, Mitsubishi, Toyota and Volkswagen?

I figured someone would make a similar point, but for the purposes of simplicity I did not add any caveats to that statement.

It depends on what part they are supplying. There are single source parts, for example the battery pack and the motor of the Model 3 will be single source (and Tesla is sourcing from themselves). In the computer world, this would be the processor typically (usually it's either Intel or AMD).

The supplier in question however is just supplying a pump (it appears to be a lubrication pump for the axles). There are plenty of suppliers for these kinds of pumps and it's not really a special component (unlike the battery pack/motor or the falcon wing door mechanism for the Model X for example).

 

[Laban]

Don't get your hopes up. 120kW for any length of time is going to require a much bigger battery than you will probably find in a $38k Model 3. You need a big battery with today's tech to allow high Miles per Minute charging rates.

The winner will probably be the MS 100D with 19" wheels.

I wouldn't be so sure about that. Here's a video from Björn Nyland of the 28 kWh Ionic charging at a 100 kW CCS charger:

Around ~65 kW on average, 70 kW top. Extrapolate that to a 56 kWh pack and you'll get 130 kW. Do the same with a 100 kWh pack -> 230 kW.

It's also interesting to note that the Powerwall used to be 10 and 7 kWh. 10 kWh = weekly cycles, 7 kWh = daily cycles. From what i understand, the 10 kWh pack used the same batteries as the S/X, the 7 kWh used a less energy dense/better cycling capacity Li-Manganese chemistry.

The PW 2 is 14 kWh, daily cycles. Or "unlimited cycles for 10 years".

Put these two together and i'm thinking that there might be some substance behind Elons 350 kW = "a childrens toy" tweet.

 

[AnxietyRanger]

Again, my point already addresses delays and comes with pessimistic assumptions about cancellations and production rate. And even in that scenario, the Model 3 volume will be on a whole other level.

To make things clear, the Model X was delayed 1.5-2 years (promised early 2014 at launch, actual release in September 2015). Over that period they got ~27000 cumulative reservations and ~4000 cancellations. That works out to about a 15% cancellation rate.
Tesla has over 24,000 Model X reservations, twice as much as they had for the Model S

I was assuming a 50% cancellation rate (which is highly unlikely). Even if the Bolt was able to get a 100% conversion rate from Model 3 reservation holders, the effect would be about 30-50k cancellations per year (7.5-12.5%) not anywhere near enough to tip the scales, especially considering Tesla is holding off on demand levers at the moment that can easily boost the numbers (just releasing some details would be enough to drive up demand).

On thing to note, though, with the Model X example is that the actual ramp-up means the Model X was delayed more like 2.5 years. Volume deliveries did not really begin until late H1 or by H2/2016. They were still delivering international Signature orders in Q3-Q4/2016. In Electrek parlance, Model X was a bit of a California compliance car for its two, three first quarters...

Certainly if e.g. Bolt EV is available widely by mid-2017, it is possibly means - even with a Model 3 reservation and a model release in late 2017 - that actual Bolt EV availability will still be over a year sooner than a Model 3 for many (most?) buyers. Availability of Model 3 in late 2017 might be similar to what Bolt EV availability was in late 2016.

Maybe Tesla will surprise us, but past precedent suggests at least some caution. Both Model S and Model X ramped up terribly, terribly slow. Model 3 can be expected to ramp-up faster due to a simple design, but even that IMO is not absolutely certain, and even if it ramps up faster, the higher demand at the lower price point might result people waiting for a long time...

We shall see. People were very optimistic Tesla had learned things by the Model X release. Alas, not. Maybe similar optimism will finally be rewarded by Model 3 release.

 

[AustinPowers]

What is an axle-drive pump, anyway?

That's exactly what I wanted to ask. After all, what kind of pump would you need on an axle? I thought the axle was driven by the electric motor? Where does an "electric axle drive pump" fit into the equation?

 

[bro1999]

I think it's pretty obvious why people consider the 2017 Bolt a compliance vehicle.

Oh please, the "Bolt is a compliance vehicle" conspiracy theory is so lame. Assuming you mean compliance vehicle as a vehicle that "is sold in minimal volumes to comply with local/state/federal emissions regulations", the Bolt is definitely not a "compliance car". You think the Bolt is just made to satisfy CARB? Why does GM sell it in Virginia starting next month? No CARB credits there. Why is it selling the Bolt in Canada? No CARB credits there either. Norway and other parts of Europe?? Definitely no CARB credits there. And the price of a Bolt is cheaper in Canada and markets like Norway compared to the USD equivalent! GM must just love losing $9k+ per Bolt sold (ha!) in these non-CARB states/countries!

Meanwhile, Tesla has no problem whoring out CARB credits to other manufacturers for $$$ that lets those manufacturers delay coming out with their own ZEVs.

 

[bro1999]

How many Tesla Model 3 electric cars can company build this year?

A pro-Tesla Morgan Stanley underwriter predicted that *0* Model 3s will be delivered in 2017. The supplier contract cancellation only adds support to his projections.

"One new estimate came to light recently, however, delivered by a longtime Tesla booster, analyst Adam Jonas of Morgan Stanley (which has underwritten financial offerings for the company).

On January 19, Street Insider covered his revised forecast for Tesla Motors, which not only upgraded his recommendation on the stock but also revised his estimates of its vehicle production.

Previously, Jonas had projected that Model 3 production would start only at the end of 2018—with no cars at all produced this year.

His revised projections add "75K additional units of Model 3 to our 2018 estimate and nearly 100K units to our 2020 estimate."

In other words, an analyst who's largely a company booster feels it will build 75,000 Model 3 cars next year—and effectively none this year—but only 100,000 in 2020."

 

[McRat]

What is an axle-drive pump, anyway?

Perhaps an accessory pump. Steering is electric now on most cars, so perhaps coolant pump? Reduction boxes are splash, axles are sealed bearings.

If they in fact have an NDA, you seldom are allowed to disclose the part you're working on, so it might not be a pump at all, REGARDLESS of interwebbything text you might see. They don't send you drawings without the NDA in place.

 

[eisbock]

As at least one commentator has already noted, Tesla could even bring the manufacture of these pumps in-house and still be shipping M3 by end of this year as advertised.

This sounds like a terrible idea. If a company who makes pumps can't make a pump good enough, how can we expect an energy/car company who doesn't make pumps to make a better pump in less time?

 

[bro1999]

This sounds like a terrible idea. If a company who makes pumps can't make a pump good enough, how can we expect an energy/car company who doesn't make pumps to make a better pump in less time?

Trust in Elon, of course.

 

[Vitold]

This sounds like a terrible idea. If a company who makes pumps can't make a pump good enough, how can we expect an energy/car company who doesn't make pumps to make a better pump in less time?

You don't cancel supply deal unless you know that you can get better part elsewhere (or better terms).

 

[eisbock]

His revised projections add "75K additional units of Model 3 to our 2018 estimate and nearly 100K units to our 2020 estimate."

In other words, an analyst who's largely a company booster feels it will build 75,000 Model 3 cars next year—and effectively none this year—but only 100,000 in 2020."

This is confusing wording or the author is just an idiot. He added "additional units" to his yearly estimates, which implies he already had existing estimates for 2018 and 2020, and that adding additional units would boost those estimates higher. 2018 would be x+75000 and 2020 would be y+100000.

Then the next line implies that both x and y are zero. What?