Website wait times for delivery change

[Bgarret]

Very surprising that the 70D is supposed to arrive in RHD countries before the 85D/P85D... I would have assumed that it has the same problems...

Another explanation would be the August quota is full of 85D and P85D orders taken over the last couple months and 70D will catch up.

85D and P85D were August about a month ago

..Website wait times for delivery change - Page 24

 

[Gerasimental]

Is there an obvious reason why delivery date for D models is unchanged for all East Pacific markets, both RHD and LHD? I guess this just tells us a little about the shipping schedule but I can't figure out if there's any useful information in there.

 

[SteveG3]

This is an interesting connection indeed. While I think that Elon initially pushed MX back because he did not see urgency to bring the new SUV to market at the time when MS demand was consistently exceeding the company projections, and he, similarly to the stated goal for Model S, wanted MX to be the best SUV in the world, at certain point it became evident that starting MX production by building it’s body on the BIW production line that could be dedicated just to MX made a lot of sense. Firstly it decouples MS and MX body assembly, minimizing risk that any manufacturing adjustments that need to be done due to MX production are not adversely affecting production of MS. Secondly it allows for a more robust ramp-up of MX as compared to the case of both cars being produced on the same line.

As for the demand in general, I agree with both you and Maoing – at certain point we will reach saturation, as market for a $100K sedan, even if it is indeed the best sport sedan in the world, is not infinite. But I would not characterize this point as a demand **problem**, as it just a natural market saturation point for a premium sport sedan from one company, however innovative and disrupting it is.

So we, as investors need to understand where this saturation point is, so we can gauge whether Tesla is not overextending resources to invest in additional capacity that they might not ever utilize. However, at this point it looks that from the point of view of the demand we are clearly not at a saturation point, and TM are very shrewd in charting just the right course. My personal view is that we will be approaching saturation at about 120K MS/MX per year, perhaps toward the second half of the next year.

I totally agree that it is not a demand "problem" that at some point S/X will be demand rather than supply constrained, or reach saturation as you put it. I wasn't very explicit, but that's the point I was trying to get across- reaching peak volumes on S/X is not some sign that Tesla or the opening for long range BEVs is in trouble, not an unspeakable nightmare haunting longs, but natural for any product. No one really knows where this will happen, but clearly at a number several times larger than the 30K S/X Tesla originally planned to fund the Model 3. Just as you suggested, as long as Tesla is spending for growth at a level for which the peak sales number is sufficient to fund, there is no issue (and, of course, Tesla is already spending at a higher rate than they did when they thought S/X would top out at 30K/year). As long as Tesla does not overextend itself in these early days with only the Gen 2 platform, the demand story that matters is the ramp up to millions of vehicles per year in the next 10-15 years, not pinning down S/X near term peak sales to 105K vehicles per year or 135K.

 

[schonelucht]

It just makes the case that Tesla is conserving batteries for something.

Not really because for the US, a far lager market, it's just the other way around.

 

[Matias]

The post you are referring to is about general assembly line upgrade. The quote you are mentioning is also referring to the capacity of this just upgraded line. It can produce 2500 cars/week with two shift per day operation. The vehicle is assembled on this line, i.e. interiors, drive unit, battery pack, etc. are installed into the painted body of the car.

The body of the car, however, is assembled on another line, called body in white assembly line. This BIW line was originally designed to handle 800 cars/2 shift week. ]

So why don't they work in three shifts?

 

[vgrinshpun]

So why don't they work in three shifts?

As I mentioned in the post you are responding to, they do run more than two shifts in order to hit around 1000 cars per week. To clarify "more than two shifts" it means more than 80 hours per week. They could be running two shifts on Saturday and partial extended shifts during the week, or may be extra shift on Sunday, or any similar combination.

TM are using overtime to run the extra shifts, which means that some personnel working more than 80 hours per week. I see that you are from Finland, so just to make clear that you are aware of this, overtime is paid at 1.5x of the regular rate, so using OT means higher labor cost per car. Running OT for long periods also tends to lead to burnout of personnel, reduced productivity, higher susceptibility to human error.

I hope I unswered your question, but it is rather short and cryptic, so if I did not address what is on you mind, just be a little more specific with your question.

 

[green1]

So why don't they work in three shifts?

I think his post pretty much proves they do. 800/wk in 2 shifts would be less than 1200/wk in 3 (lose some to shift change efficiencies and you do also have to actually stop the line here and there for minor maintenance of machinery, otherwise normally done in the "off" shift)
so 1000/wk stated run rate sounds like they're basically at 3 shifts.

 

[xhawk101]

I'm sorry, Maoing....but ya gotta do better than this. So you REALLY believe that Tesla, rather than advertising and using 'other levers' to increase demand, is secretly slowing the production ramp-up to hide a demand problem?? Like, really?

If you want others on this forum to respect your opinion, it needs to be plausible.

Amen.

 

[maoing]

Vgrin, thanks for your education of the big picture, it definitely helps the TSLA investment community. But back to our discussion, the fundamental focus of our arguments:

Vgrin -- the current production is limited by 800/week in body line;
>>>> Please show the proof from shareholder letter, CC or any other official source in recent years (2014, 2015)? I specifically asked this questions multiple times. But looks you are the only person who claimed this statement, so that's the reason I suspect it's your own speculation.

Maoing -- The fact that Q1/Q2 production rate stays flat is contradict from Nov. production upgrade blog, which claimed that "production can be improved significantlly with minor adjustment" on top of 1000/week rate.
>>>> I do understand the challenges on the way to 2000/week, but I'm just questioning why the production ramp up to 1200-1300/week level not happening in Q1/Q2 based on the blog from Nov. Note, my observation is from official TM blog and Q1/Q2 guidance, so it's not speculation!

Nevertheless, every investor can put together the information they get and guide their investment. For this production myth, I think none knows the truth except Elon and a few high level management in TM.

So the blog referred in your post addressed things that **WERE** upgraded during the last summer stoppage, but it was not addressing things that **WERE NOT** upgraded last summer. In another words the blog post did not mentioned any upgrades to the factory that were planned, but not accomplished yet simply because that was not the subject of it.

One, however, can't claim that the company is "hiding bottlenecks" based on the fact that other future upgrades required to reach the planned 2,000 cars/week running rate by the end of 2015 are not included in the post - simply because these additional steps were discussed by the company multiple times **BEFORE** this blog post was published. It is completely frivolous to maintain that company is hiding something because you are simply unaware of it.

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Frankly speaking this is NOT a plausible explanation. 3 shifts doesn't mean work over time, what's the cost of hiring an extra shift of worker for body line? What's the revenue/profit loss due to 2 shift limitation. Not to mention the market cap loss, TSLA has lost more than 10B USD since last fall due to production hiccup. It's a no brainer to hire more people and even pay overtime pay to get production boosted unless there are some other concerns?

Remember, every week has 168 hours, theoretically the factory can do up to 4 (40 hours) shifts (including weekends) to boost production. I'm not saying TM should be 4, but 3 is very reasonable expectation if it's really production constrained.

TM are using overtime to run the extra shifts, which means that some personnel working more than 80 hours per week. I see that you are from Finland, so just to make clear that you are aware of this, overtime is paid at 1.5x of the regular rate, so using OT means higher labor cost per car. Running OT for long periods also tends to lead to burnout of personnel, reduced productivity, higher susceptibility to human error..

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I feel sorry to see your reponse. I gained my respect in TSLA investment community by my independent thinking and logical analysis instead of entertaining specific favor of some optimistic TSLA bulls.

Claim: I'm net and 100% long TSLA shares only. My position is larger than majority of the folks here who claimed their position size. I'm no doubt a overwighted long but it doesn't prevent me to question TM from my observation from different sources.

I'm sorry, Maoing....but ya gotta do better than this. So you REALLY believe that Tesla, rather than advertising and using 'other levers' to increase demand, is secretly slowing the production ramp-up to hide a demand problem?? Like, really?

If you want others on this forum to respect your opinion, it needs to be plausible.

 

[bonaire]

If production rate starts to catch up with demand then tesla will simply pull more of the demand generating levers... Including the mysterious "demand secret weapon". Hopefully we will find out what this weapon is at some point.

There will be some who say "if they pull that lever, they it is an admission that demand is a problem". What the real management issue would not be "demand" but rather "demand increase rate". The more stores and superchargers are deployed, the more demand is necessary to keep the business "expansion" at a level of profit per unit sold. If they increase sales at 10% and SG&A costs and capital expense growth at 15% ongoing, then it all falls apart. Sales must increase faster than expenses.

There is a level of efficiency needed where "same store sales" need to increase with the same capital expense. Stagnation is the worst thing that could happen as the stock price, which is the heart of the matter of this thread, relies on continuous growth and risk rears its head when quarter on quarter growth is flat or appears to be flattening without cause for growth to come. Tesla has a great-unknown coming, the storage business. It is much like 2011-2012 where the Model S orders were in but cars not yet build. Nobody knew exactly how many cars could be sold per quarter or year. But now with the new great-unknown, the battery storage products, there is another new risk/reward scenario to be played out. Realistically, it is an unknown demand and unknown profit potential - so that increases the market "implied volatility risk". Until run-rate is seen, it is really hard to judge.

 

[Hogfighter]

I feel sorry to see your reponse. I gained my respect in TSLA investment community by my independent thinking and logical analysis instead of entertaining specific favor of some optimistic TSLA bulls.

Claim: I'm net and 100% long TSLA shares only. My position is larger than majority of the folks here who claimed their position size. I'm no doubt a overwighted long but it doesn't prevent me to question TM from my observation from different sources.

I'm not questioning your verve for TSLA as a stock. I'm questioning your reasoning when you insinuate that Tesla is lying when they say they are production limited.

Your insight into the China situation has been very helpful, and I (as most others are on this forum) am constantly looking for quality bear arguments.

 

[Matias]

ö

I think his post pretty much proves they do. 800/wk in 2 shifts would be less than 1200/wk in 3 (lose some to shift change efficiencies and you do also have to actually stop the line here and there for minor maintenance of machinery, otherwise normally done in the "off" shift)
so 1000/wk stated run rate sounds like they're basically at 3 shifts.

Ok. I thought that 800 with two shifts would be 1200 with three shifts.

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As I mentioned in the post you are responding to, they do run more than two shifts in order to hit around 1000 cars per week. To clarify "more than two shifts" it means more than 80 hours per week. They could be running two shifts on Saturday and partial extended shifts during the week, or may be extra shift on Sunday, or any similar combination.

TM are using overtime to run the extra shifts, which means that some personnel working more than 80 hours per week. I see that you are from Finland, so just to make clear that you are aware of this, overtime is paid at 1.5x of the regular rate, so using OT means higher labor cost per car. Running OT for long periods also tends to lead to burnout of personnel, reduced productivity, higher susceptibility to human error.

I hope I unswered your question, but it is rather short and cryptic, so if I did not address what is on you mind, just be a little more specific with your question.

Why do they need to use overtime. Why can't the they hire more people?

 

[bonaire]

I'm not questioning your verve for TSLA as a stock. I'm questioning your reasoning when you insinuate that Tesla is lying when they say they are production limited.

Your insight into the China situation has been very helpful, and I (as most others are on this forum) am constantly looking for quality bear arguments.

One of the later production constraints include the Recaro seats last December into Q1 and then an engineering issue with RHD D models. But I do not believe they have battery issues any more.

 

[vgrinshpun]

Vgrin, thanks for your education of the big picture, it definitely helps the TSLA investment community. But back to our discussion, the fundamental focus of our arguments:

Vgrin -- the current production is limited by 800/week in body line;
>>>> Please show the proof from shareholder letter, CC or any other official source in recent years (2014, 2015)? I specifically asked this questions multiple times. But looks you are the only person who claimed this statement, so that's the reason I suspect it's your own speculation.

I am wondering if you realize how ironic this request is, given that it is coming from you. You are choosing to dismiss Elon's specific official statements that company is production constrained, but claiming that you could accept this premise if only I show you the proof from the official source regarding the 400 cars/shift limitation of the BIW line?? If you choose to believe that Elon is lying, to the point of coming up with conspiracy theories, while providing absolutely no basis except your apparently deeply felt suspicions, I am afraid I am wasting my time trying to show that Elon's statements about production constraint can be easily verified by anybody who takes time to closely follow company on the issues of production.

A while ago, in exchange with you, I mentioned that the first source for determining factory design capacity was National Geographic "Mega Factories" video, where the crew discussed achieving sub 5 min "tack" time to perform the final assembly of the car. Did you take time to watch it? There was also many other instances that pointed/mentioned this basic fact. I am really surprised that you are completely unaware of this. What I also like to kindly suggest is that you perhaps should not be making accusations of Elon lying so lightly, especially in the view of the fact that you apparently spent very little time following company's production issues.

To conclude on the discussion of this, I am perfectly OK if our opinions differ here, but I am really concerned that you are spreading information which is contrary to the basic facts and official communications from the Company and is misleading others who might not have time or inclination to follow company's production upgrade progress. Nevertheless, I will try one more time. I hope that you understand that the following reference is not the only one, just one of many. According to this ValueWalk article that details key takeaways that Goldman Sachs analysts made during the field visit to the factory and a meeting with Elon in May of 2013, the company's production capacity (obviously prior to the current revamping) was 20K units per year per shift (or just under 400 cars/week/shift):

The main goal of the production team currently is to get production levels of 20K on a single shift across most processes (currently body assembly and finished assembly are still running on a 2 shift basis) and then ramp up to 40K units in 2 shifts.

Maoing -- The fact that Q1/Q2 production rate stays flat is contradict from Nov. production upgrade blog, which claimed that "production can be improved significantlly with minor adjustment" on top of 1000/week rate.
>>>> I do understand the challenges on the way to 2000/week, but I'm just questioning why the production ramp up to 1200-1300/week level not happening in Q1/Q2 based on the blog from Nov. Note, my observation is from official TM blog and Q1/Q2 guidance, so it's not speculation!

As I mentioned, more than one time at this point, the November Blog had nothing to do with the upgrade of the BIW line, the discussion that you are referring to dealt with the general assembly line. As I pointed out both before and after publishing the blog, company in official communications specifically mentioned that upgrade of the BIW assembly line did not happen at that time and is slated for first half of this year.

Frankly speaking this is NOT a plausible explanation. 3 shifts doesn't mean work over time, what's the cost of hiring an extra shift of worker for body line? What's the revenue/profit loss due to 2 shift limitation. Not to mention the market cap loss, TSLA has lost more than 10B USD since last fall due to production hiccup. It's a no brainer to hire more people and even pay overtime pay to get production boosted unless there are some other concerns?

Remember, every week has 168 hours, theoretically the factory can do up to 4 (40 hours) shifts (including weekends) to boost production. I'm not saying TM should be 4, but 3 is very reasonable expectation if it's really production constrained.

This just does not make any sense whatsoever. Again, if you would spend some time listening to the ERs while focusing on the productions issues, you would know the following:

• The new BIW line will be able to produce 2500 cars/week, while **reducing** the quantity of people required to operate it
• Elon expressed concern that factory's employees growth perhaps is not sustainable and must be curtailed for the sake of efficiency.

So the question is why would it be efficient for the company to hire and train third shift worth of additional personnel if within three to six months it will launch production line capable of producing 2500 cars/week with **less** people that is required to operate current (800 cars/week) line?? The money and company's focus spent on training of this third shift would be a complete waste. This is the reason that the company is using overtime.

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Why do they need to use overtime. Why can't the they hire more people?

See explanation that I've given in response to the same question from Maoing above.

 

[RationalOptimist]

I'd like to call for a bit of a truce between vgringshpun and maoing. From where I'm sitting, both have made strong contributions to the forum in terms of facts and analysis. Because they come to different conclusions, it's easy for the discussion to disintegrate into accusations about motives, etc. To me the best way to understand the situation is that the whole 'production-constrained/demand-constrained' debate is based on a false assumption that there's no space in the middle. Tesla's strategy is to use the gross margins, learning, and infrastructure roll-out of its current line-up to pave the way for a massive assault on the mass market in a couple years time. There's nothing in that strategy that says it would be smart to seek to maximize sales or production in 2015. It does not just want to grow regardless, it wants to grow smart. If demand were double what it is today, I have no doubt management would find ways to further increase production. It would probably mean sacrificing something on gross margin... but in terms of cash-flow generated for the Model 3 would still be worthwhile. So to that extent, surely we can all agree we may be to some extent demand constrained. On the other hand, given the current still-impressively-high demand levels, there's a strategy to grow smart. Don't exhaust the work-force. Figure out how to build capacity for model X roll-out, greater manufacturing efficiency, etc. And keep the innovations coming so that the Tesla's core brand value of a different kind of car company is sustained. The fact that we can produce at >50% growth on this strategy and have buyers for every car is incredibly impressive.

I think to some extent the company and some of its most vocal supporters have got trapped into representing itself as production-constrained when there really isn't any precision around that term. The more insightful question is: is there a growth path ahead that credibly takes the company on its journey of transforming the auto industry. To me, that journey still seems 100% on course regardless of your stance in the increasingly sterile production/demand constrained debate. On a different note, a calmer, friendlier tone allows us all to learn more, I think. I'm a huge Tesla bull long-term, so in a sense have been cheering vgringshpun on, but have found maoing's informed skepticism on some points really helpful. I don't ascribe any ulterior motive to him other than desire to understand what's really going on.

So here's to an outbreak of peacemaking, and hope that Tesla's relentless product improvements continue to make the case ever more clear that this is the car of the future.

 

[sundaymorning]

It's pretty darn easy to see that certain posters here have their agendas. When the individual sells their shares, they harp on the "demand issue", the sky is now falling.. then after re-buying some shares, the "demand issue" suddenly becomes non-existent, the heavens are now rising.. then it's rinse and repeat.

As as a long term investor, I appreciate posts who are succinct in their analysis, fighting back FUD, which is nothing new here in the forum: just some of the same old s**t, but a different fly harping on demand problems.

 

[MartinAustin]

Just my $0.02... with respect to the overtime question, don't forget that they "turn on the third shift" and turn it off again when demand is less - i.e., sometimes they're manufacturing for 16hrs a day, and sometimes they're manufacturing for 24hrs a day. I do not know the figures, but let's say there are 2,500 workers on the factory floor, producing cars. For two shift's worth of workers, you need 5,000 workers, half of whom are at home most of the time. All 5,000 workers are skilled auto manufacturing workers, who have been interviewed and put through the hiring process, and who have built up experience building Model S.

When you want to go to 24hr-a-day production, you have two choices - #1 you put everyone on overtime and have two 12-hour shifts, or #2 you need a third shift of 2,500 additional workers to do three 8-hour shifts, and this third set of 2,500 skilled workers would just sit around at home all year waiting for the call. As soon as they get the call, they show up to work and start manufacturing Model S as if they had never had any time off. With method #2, you avoid overtime... yay!

Of course, situation #2 is impossible. Situation #1 is what they will do... put everyone on overtime.

To the point that 24hr manufacturing does not result in 150% of the number of cars that two 8-hour shifts will produce... this is true, because during normal times when there are two shifts, the factory lies dormant for 8 hours overnight. At this time, the factory is restocked with new parts, repairs are made, everything is inspected and calibrated, and so on. This is carried out by a relatively small "overnight crew." When the factory is in 24-hour manufacturing mode, there are less obvious opportunities to do this, and some overnight work ends up fouling up the process.

 

[dalalsid]

Not really because for the US, a far lager market, it's just the other way around.

I think Tesla is conserving just enough batteries to make the Model X 100kWh (pure speculation and I just published an SA article with some calculations, which I'll post here once the article goes live to the public tomorrow).
Seeking Alpha - Early Look for PRO Subscribers | Seeking Alpha
+ thanks vgrinshpun for keeping track of this stuff.

 

[maoing]

I totally agree with you. That's all my points. There is no absolute production constriants. The real TM sales growth rate (TSLA growth trajectory) is actually constrained by demand now. It's not sth. I want to scare investors in this forum, but be clear about the fact will help the investment strategy.

Tesla's strategy is to use the gross margins, learning, and infrastructure roll-out of its current line-up to pave the way for a massive assault on the mass market in a couple years time. There's nothing in that strategy that says it would be smart to seek to maximize sales or production in 2015. It does not just want to grow regardless, it wants to grow smart. If demand were double what it is today, I have no doubt management would find ways to further increase production. It would probably mean sacrificing something on gross margin... but in terms of cash-flow generated for the Model 3 would still be worthwhile. So to that extent, surely we can all agree we may be to some extent demand constrained.

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This is plausible explanation. Basically this demand is not constantly strong enough to employ third shift 2,500 workers. So it's not good for efficiency and cost control. If demand is "strong" enough, then that's different story.

Just my $0.02... with respect to the overtime question, don't forget that they "turn on the third shift" and turn it off again when demand is less - i.e., sometimes they're manufacturing for 16hrs a day, and sometimes they're manufacturing for 24hrs a day. .

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Sorry Vgrin. You still didn't provide proof of your 800/week theory. I think thing is clear now. Please don't finger-point "mislead". It won't be fun to have debate go personal. Let's stop here and truth will get clarified eventually.

I am wondering if you realize how ironic this request is, given that it is coming from you. You are choosing to dismiss Elon's specific official statements that company is production constrained, but claiming that you could accept this premise if only I show you the proof from the official source regarding the 400 cars/shift limitation of the BIW line?? If you choose to believe that Elon is lying, to the point of coming up with conspiracy theories, while providing absolutely no basis except your apparently deeply felt suspicions, I am afraid I am wasting my time trying to show that Elon's statements about production constraint can be easily verified by anybody who takes time to closely follow company on the issues of production.

 

[vgrinshpun]

I totally agree with you. That's all my points. There is no absolute production constriants. The real TM sales growth rate (TSLA growth trajectory) is actually constrained by demand now. It's not sth. I want to scare investors in this forum, but be clear about the fact will help the investment strategy.



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This is plausible explanation. Basically this demand is not constantly strong enough to employ third shift 2,500 workers. So it's not good for efficiency and cost control. If demand is "strong" enough, then that's different story.



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Sorry Vgrin. You still didn't provide proof of your 800/week theory. I think thing is clear now. Please don't finger-point "mislead". It won't be fun to have debate go personal. Let's stop here and truth will get clarified eventually.

So what is the annual demand (say Model S) that is constraining TM right now? Could you put a number to it?

Can you explain why do you think a reference to the 400 cars/shift is not an indication of the current BIW capacity?

Basically this demand is not constantly strong enough to employ third shift 2,500 workers.

Except that they already employ it in order to hit 1000 cars/week (for about 5 months now). They just use OT to run it. The real reason for not hiring third shift is that factory throughput will be 2500 cars/80 hr week in about three month. Absolutely no sense to hire and train people - this would be a complete waste.