Interesting.
This will reduce the need to carry some raw material inventory on Tesla's books if the inventory is held by the supplier just a few yards/meters from Tesla's receiving dock. Streamlines logistics and positive to Cash Flow.
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Although this technique has long been used, as in Panasonic in GF Sparks, this one appears to be larger in scale, maybe because Tesla directly has arranged the real estate, and is planning well ahead of actual production. In Shanghai CATL is building adjacent to GF Shanghai, but in land that seems to have been arranged directly by CATL. Austin already has a massive area and other facilities are under construction, some with known purposes. Thus far we really do not know what is planned in all that space.
There seems to be a significant revision in any prior iterations of JIT in that Tesla now is coordinated to a seemingly unprecedented degree in actual manufacturing technology, most obviously with IDRA/LK and with SpaceX materials suppliers. Perhaps the most obvious examples of that are in Steel (e.g. Steel Dynamics in Sinton, TX, 175 miles south, but a steel producer really needs the port access) , Aluminum, and sensor suppliers. Then there is FSD 3 and FSD 4 chips, both by Samsung, which is building a new plant in Taylor, TX roughly 45 minutes from Austin GF.
There are departures from this kind of approach and others that seem similar on the surface. Most of the other OEM's tend towards Tier One supplier agreement, in which the Tier One does nearly all the R&D and then produces to specifications from the OEM, that are themselves commonly quite general. The Tier One usually delivers completed assemblies of some kind to the OEM. There is little of that with Tesla, which usually designs exactly what to supply and how to make it. The suppliers which fail end out being replaced, often by Tesla itself. (probable exception to that rule: CATL, which supplies completed packs to Tesla in Shanghai.
There will be dozens of other examples that we will understand better as both Austin and Berlin ramp and as Shanghai and Berlin complete their own designs. Without much doubt Tesla supplier arrangements for those vehicles will be broader than any have been before.
This is all quantitatively and qualitatively different than Model S in 2012, when Mercedes S class componetry was overt. The Model S of 2021 only resembles the 2012 version in shape. How is that relevant?
That is fundamental to the Tesla continuous improvement fo hardware and software. Suppliers are all required to adapt to constant change in whatever they supply, with only the promise of continuing growth to sustain them. Thus, the supplier proximity and adaptability are crucial.
All this shows how much the Panasonic experience has taught Tesla. It seems the experience has taught Panasonic too, since they're building a 4680 line themselves, as are others.
What this process will show is the continuing reduction of WIP and raw materials inventories, even as Tesla dominates the entire supply chain structure.
Soon Tesla will be in shipping both land and sea. Just how they will (are) doing that is not yet clear, but they'll need huge improvement to reduce both raw materials and finished goods inventories.
Just how much can free cash flow increase in the next couple of years? It will be amazing. It already is.
voice in my head is laughing manically right now.
