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Will Tesla add a third production line in 2016 to meet growing demand for S/X in 2017

Discussion in 'TSLA Investor Discussions' started by Benz, May 5, 2014.

  1. Benz

    Benz Active Member

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    Will Tesla Motors add a third production line at the Tesla factory in Fremont in late 2016 to meet the year over year growing level of total annual demand for the Tesla Model S and the Tesla Model X as from 2017?

    By the way, this third production line will not be meant to be producing the Tesla Model E, because I think that Tesla Motors will manage that separately. And they might even decide/choose to manufacture the Tesla Model E at a separate location.

    This thread is purely focussed on the year over year increasing total annual demand for the Tesla Model S and the Tesla Model X (because both cars are built on the same Generation 2 skateboard platform).
     
  2. igotzzoom

    igotzzoom Member

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    The Fremont plant has a capacity of 500,000 units a year, at least when Toyota was running. At its current capacity, it's barely scratching the surface.
     
  3. SteveG3

    SteveG3 Active Member

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    indeed, they wouldn't need another plant. that said, I think the question of a 3rd line is an interesting one.

    I'm not clear on how many vehicles each line can produce in a year. I have this vague sense that it is something in the 50-60K range, but I'm not sure if that is full capacity utilizing maximum (3?) shifts or not.

    I think Model S/X demand in 2016 would be from 130K-220K. So, if the 50-60K per line number is correct, it will be interesting to see if Tesla decides to invest in adding a 3rd line. When Model 3 gets near full Fremont production, ~2019, I think S/X demand would likely dip some. If Tesla could get in 3 years of an extra 60K or so S/X sales, that would be roughly $2 billion in profits... would really help with another GF or vehicle factory.
     
  4. 32no

    32no Member

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    Their current production line is supposedly capable of 800 cars/week. During the 2 week shutdown, Tesla is supposed to start a second line that is capable of 1200 cars/week, and also update the old production line so that it can run at the same rate. These two lines will be for the Model S and Model X, and will run at a total of 2400 cars/week which is about 120,000 cars per year.
     
  5. SteveG3

    SteveG3 Active Member

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    production numbers sound about right (though I'm still not clear if this is based on maxing out shifts), but my recollection of past comments on earnings calls, etc., is that a second line is being added in a few months. perhaps I have this wrong.

    curious to hear what other people think the demand will be like for S/X in 2016.
     
  6. DaveT

    DaveT Searcher of green pastures

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    ??? Where are you getting these numbers ???

    From my understanding Tesla isn't adding a 2nd production line right now. They're shutting down the factory to expand the existing production line. However, the existing production line isn't simply one line, since there are various parts of the line that have more than one line. In other words, it's one big fat line... with some parts of it acting like more than one line, but overall it's still one line. This expanded production line will allow them to produce 1000/cars week (per Elon Musk)... and probably a bit more, maybe 1150-1200/week if they push it (per vgrinshpun's deductions on some previous reported figures in some articles a while back).

    - - - Updated - - -

    Regarding the topic/question of this thread, Tesla will likely have to add a second production line in mid-2015.

    The currently expanded production line can produce 50k-60k cars per year. So that's not going to be enough to meet 2015 demand/production, which will likely be in the 70k range. So, in order to meet that Tesla will have to probably build a new second line in mid-2015. They can get started slowly on it (ie., producing 400/cars per week), but eventually (going into 2016) they will have to expand it to a fully expanded line (ie., 50k-60k units/year). That will give Tesla production capacity of roughly 100k-120k/year in 2016.
     
  7. 32no

    32no Member

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    #7 32no, Jul 21, 2014
    Last edited: Jul 21, 2014
    My numbers are from posts that I remember reading on TMC, including vgrinshpun's posts.

    Tesla slowly approached 800 cars/week and have been hovering there for at least a month now. Also, Tesla has planned to expand to 1000 cars/week, so it is reasonable to assume that their first line is capable of 800 cars/week. However, I'm not sure whether they are upgrading their old line to max out at 1200 cars/week, adding a new line to max out at 1200 cars/week while leaving the old line for Model X prototypes and Model X, or updating their old line to max out at 1200 and starting a new line for Model X prototypes and Model X. I suspect that there is a high probability that they are working on a second line to some extent during this 2 week shutdown because otherwise they would not be able to put out Model X Beta prototypes for test drives in the fall (assuming that they aren't using a piece of the S line to make prototype Xs, which probably would be inefficient and would interfere with ramp up).

    All in all, whether the max is 1000 or 1200 cars/week, Tesla will be producing 100k+ cars in 2016.
     
  8. DaveT

    DaveT Searcher of green pastures

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    There's a lot of misunderstanding going around about Tesla's production lines.

    Tesla is not adding a second production line right now. They are expanding and updating the current production line.

    The best article to understand this dates back to last year May, Tesla Motors Inc (TSLA) Envisions Selling Around 500K Units: Long Term :
    "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. For the ramp up beyond 40K, the Tesla Motors Inc will require only $25-$50mn of additional capex to take the volumes to 50K units annually."

    Let's dissect this a bit. So, Tesla can make 20k cars/year on a single shift on their production line. That's 400 cars/week (50 weeks/year). By adding a 2nd shift, they can ramp to 40k units/year or 800 cars/week. This is where they are currently. Then, if they add a capex expense to expand the line they can increase volumes to 50k cars/year or 1000 cars/week. This is what they're doing right now by shutting down the factory for two weeks.

    In other words, Tesla is expanding their current production line to make it more efficient. How are they doing this? They are moving around things, and also adding more production capacity to certain parts of their line (ie., body and assembly lines). They're also updating the production line so that they can produce the Model S and Model X on the same line.

    Some people think that Tesla is adding a second production line while keeping their original one. This is not the case. They only have one production line and they are just expanding it. It's still going to be one production line, just with an increased capacity of 1000 cars/week (although we can speculate that it's possible that the line might produce a bit more than that).

    Now things get a bit complicated, since from how I understand things there are certain parts of the production line where it's a single line (ie., perhaps pressing), but there are certain parts where it's more than one line. So, you might be able to say that Tesla is adding another production line for certain parts of their production line (ie., body and assembly). But overall, it's still just one big fat production line.

    If you notice, Simon Sproule (Tesla Idles California Plant to Retool for Electric SUVs - Bloomberg) didn't talk about a "second" production line. Rather he talks about reconfiguring the production floor.
    "Work to reconfigure the production floor at the facility in Fremont began yesterday and vehicle assembly will resume in two weeks, with a goal of boosting production by 25 percent, said Simon Sproule, a spokesman for the carmaker. The $100 million upgrade will add 25 robots and modify the factory’s body and general assembly lines, he said."

    Also, Elon Musk in Q2 2014 conference call doesn't refer to it as a "second" production line. Rather he says:
    "So, it actually will actually be taking the factory – the Fremont factory down for roughly days or so in July to convert inline, which enables a substantial increase in our production capacity on the vehicle side, as well as a labor house reduction. So it’s just fundamentally more efficient process."

    So, just because people on TMC say Tesla is adding a 2nd line doesn't make it true.

    - - - Updated - - -

    It appears that Tesla is spending $100 million for the production line upgrade. Initially, the May 2013 Valuewalk article stated that it would cost $25-50 million to expand the production line to 50k cars/year (1000 cars/week). However, I think that amount was just for the Model S, meaning expanding the current line to make more Model S's. Tesla decided not just to expand the current line to make more Model S's but they've decided to update the line so that they can produce Model S and Model X on the same production line. I think this is where the additional $50+ million is going to.
     
  9. vgrinshpun

    vgrinshpun Active Member

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    I think that second line will be added some time this year. According to several articles published when TM got California manufacturing equipment sales tax break, it was reported that the tax break will be on "new manufacturing equipment worth up to $415M". According to Bloomberg article TM will spend $100M for the current retooling, so the remaining $315M are slated for the second line.

    This would be also consistent with Elon remarks about testing depth of demand for MS in second half of this year. I believe that one final assembly line (about 1200 cars/week with two shift operation) will be maxed out some time in the second half of this year, producing Model S. The second line, therefore will need to be added some time by the end of this year, and will be generally dedicated to Model X.
     
  10. DaveT

    DaveT Searcher of green pastures

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    I hope my post (right above here) helps to explain this. There is no leaving an old line and making a new line. Tesla has been clear that they are upgrading and expanding their current production line so it'll be capable of producing 1000 cars/week (although we can all hope that it can produce a bit more than that). In other words, there is only one line and after the shutdown there will be only one line - it'll just be a better line that will be able to produce Model S and X on the same line and will be able to do it much more efficiency (labor count) and with more capacity (1000 cars/week).
     
  11. pGo

    pGo Member

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    Do you really think Tesla will be able to produce 70K vehicles next year and that such demand will be there?
     
  12. DaveT

    DaveT Searcher of green pastures

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    I see it differently.

    There's no reason to start on a second production line this year. Tesla's guidance for the year is 35,000 cars. They can meet that guidance with their newly expanded production line (capable of 1000 cars/week). They aren't in a rush to make a new line to expand beyond 1000 cars/week since they don't even have the battery supply to make that many more cars than they currently do.

    If this updated line can push capacity to 1200 cars/week (I'm still unsure about this because Elon and Tesla have reiterated their 1000 cars/week goal for this line), then that can take them all the way into early next year without any problems. It's only when Model X starts to be produced in volume (ie., Spring 2015) when Tesla will start to feel the limitations of their current production setup.

    So, I expect them to construct a second production line (pretty much identical to this updated one they're working one) probably early or mid 2015.

    Another way to look at it is if Tesla guides 70k cars for 2015, then with their current updated production line, it might be possible to produce 50k-60k cars. So they just need to produce an extra 20k cars or so to meet their 2015 guidance. In order to do that, they can construct the new production line as late as mid-2015 and have it produce 20k+ cars, so that they meet their 2015 goals.

    - - - Updated - - -

    70k demand for Model S/X is definitely there. The question is will the be enough batteries. But I think the updated Panasonic agreement is starting to relieve some battery supply constraints.

    Another way to look at it is in 2015, what will Model S demand be and what will Model X demand be?

    Model S will likely be at least 50k cars/year (since they're selling 35k cars this year and there's a 2-3 month backlog, and demand is growing).

    Model X will likely have at least 20k pre-orders. And I don't think Tesla will be able to meet Model X demand (ie., over 50k cars/year) until at least 2016.
     
  13. 32no

    32no Member

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    Ok. Thanks for the info. I guess I was wrong to assume that they are working on a second line during this 2 week shutdown. However, it seems inefficient to produce Model X prototypes for fall test drives on the Model S line because Tesla would have to run Model X through a "prototype" production line before they use said production line to build actual Model Xs that are for sale. If Tesla wants to start X deliveries in Q2'15, then they have to have a production line ready (built and tested with Beta Model Xs) before that time. This means that Tesla will have to start work on the second production line in Q1'15 at the latest. I just think it would make more sense if Tesla built Beta prototype Model Xs on a second line right from the start, which is in Q3'14 since Tesla plans to have Model Xs ready to test drive in the fall. Also, Tesla is struggling to ramp up their first production line to meet demand, so why would they put more strain on this line by building X prototypes on it when they can start working on another line and have all the kinks worked out by the time X is ready for production (Q2'15)?
     
  14. vgrinshpun

    vgrinshpun Active Member

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    I agree with this, it is now makes sense.

    Some time ago, however, there were no information from the Simon Sproule, and no live photos illustrating expansion and re-configuring the current layout of the production floor (from TMC Connect Conference). I believe that I was the one who started first talking about second line, based on terminology used by Ben Kallo of Baird in one of his interviews after visiting the factory.

    At this time, however it is clear that TM are re-configuring the current production layout.

    I still believe that "second line", or whatever it is called, will be added by the end of this year and will allow to take production rate above 50-60K units per year in 2015. One has also have to remember that prior to producing Model X, there will be a period of time required for tuning the production for the new car, and it makes a lot of sense to do it on a "second line" to minimize disruption to the "first line" that will be running a full two shift capacity producing MS by the end of this year.

    - - - Updated - - -

    As I posted a while back, they will have battery capacity to go beyond 1000 cars/week by end of this year. It was also mentioned by Elon in one of his visits to Germany (enough batteries to build 1200 cars by end of this year).
     
  15. DaveT

    DaveT Searcher of green pastures

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    I think you're misunderstanding Tesla's approach. Tesla will be producing the Model S and the Model X from the same production line. They're upgrading the line as we speak so that it can produce both S and X.

    From Tesla Idles California Plant to Retool for Electric SUVs - Bloomberg
    “This represents the single biggest investment in the plant since we really started operations and enables us for higher volumes,” Sproule said by phone yesterday. “It gets us ready to build X and to do it on the same line as the S.”

    In other words, the upgraded line will have the right robots and tooling to produce the Model X. Come next spring, the Model X will roll off the same production line as the Model S.
     
  16. mulder1231

    mulder1231 Active Member

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    Dave, I'll repost two pictures on the factory capacity expansion plans that Diarmuid O'Connell, VP of Business Development, showed at TMC Connect this weekend.

    He did talk about improvements planned to the second floor production line of battery packs and modules (he also mentioned they usually don't talk much about that second floor). The slide was cut off due to projector issues, so you can't see the exact timing for those improvements but I assumed they would be made this summer.

    View attachment 54090

    View attachment 54091
     
  17. maoing

    maoing Active Member

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    Given Model S demand is strong and 2014 is really to test the demand depth of Model S, so the current line regardless 50K or 60K annual production rate will be eaten up by Model S easily in 2015. Also the global reservation # of Model X is exceeding 18K now, so it's very likely to see 30K reservation before the Model X official launch in Q2 (spring) 2015. As many TMC folks pointed out that Model X (SUV) demand could be 2-3x of same platform Sedan (Model S). So TM will need to prepare another 50K production capacity for Model X alone. I think Elon mentioned that Model X production ramp up will much steeper than Model S, without 2nd line ready by Q1 2015, I don't think TM can meet the demand of both S and X in 2015.
     
  18. vgrinshpun

    vgrinshpun Active Member

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    The problem, however, is that one line rate will be maxed out at 50-60K units/year, and this rate will be fully utilized for MS by the end of this year. TM will need second line by end of the year to tune production of the MX. They are not talking about this yet, because it is not a 100% certainty at this point, but that what I believe the plan is. If you remember, they for a long time were talking about 800 cars/week by the end of this year, before switching to 1000 cars/week by the end of this year. Based on all circumstantial evidence that I posted numerous times before, including the Panasonic data, I expect this 1000 cars/week by end of this year to be updated again to 1200 cars/week by the end of this year.
     
  19. DaveT

    DaveT Searcher of green pastures

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    Each production line can produce 50k Model S or X cars per year (note: this is their upgraded line). It might be possible that the line can produce more (ie., up to 60k cars/year) but this hasn't been confirmed by Elon/Tesla.

    Tesla will add more production lines to match the pace they receive batteries from Panasonic and to fulfill guidance they give to investors.

    I'm expecting a 70k cars guidance for 2015, and that would require a second production line to be up and running by mid-2015. It's definitely possible it could be constructed earlier than that but I'm expecting early-mid 2015 timeframe.

    For 2016, I'm expecting guidance of 120k cars (60k Model S, 60k Model X). To fulfill that demand Tesla will need to construct a third production line probably in mid-2016 or so.

    So, entering 2017 I expect Tesla to be able to produce at least 150k cars (3 lines of 50k cars each) or if each line can produce 60k cars, then a total of 180k cars.

    But in 2017 we probably won't care much about all this because we'll be swept up in Model 3 fever.
     
  20. maoing

    maoing Active Member

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    I think it's a good sign that TM moves the 1000/week rate ahead of the schedule by 4 months. It means the Panasonic cell supply could be ahead of original schedule by such amount of time. As we can see from the Gigafactory deal progress, Panasonic is a conservative company, so it's likely the 2 Billion cell deal made last October is also conservative for the production ramp up schedule. By saying that, I concur vgrinshpun's theory that we'll see 1200/week rate by end of this year.

     

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