Source: Tesla Responsible For Model 3 “Production Hell”

Tesla has been vague about its reasons for missing its first full-quarter Model 3 production goals by more than 80%, blaming “bottlenecks” for the delay and “emphasizing” that “there are no fundamental issues with the Model 3 production or supply chain.” But according to a source familiar with the development and deployment of the Model 3 production system, Tesla’s rushed and disorganized approach made the current “production hell” inevitable.

At the outset of the Model 3 program, Tesla asked a major automated tooling supplier to develop two Body In White (BIW) transfer lines for the Model 3. The source, who spoke on condition of anonymity for both himself and the supplier, says disagreements between Tesla’s designers and engineers resulted in numerous revisions to the scope of the contract and eventually led Tesla to drop the second line from its purchase order (PO).

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Source: Tesla’s “Pilot” Model 3 Body Line Still In Development Near Detroit

Photos, apparently of a Model 3 “pilot team” in “Area 51,” were subsequently deleted by a now-private Instagram account.

Three months ago Tesla CEO Elon Musk tweeted that production of the new Model 3 in “Aug[ust] should be 100 cars and Sept[ember] above 1500.” But over the following quarter Tesla ended up delivering only 220 of its new more-affordable electric cars, or just 15% of Musk’s guidance. Though Tesla’s delivery press release didn’t identify the cause for this dramatic miss, it did state that

“It is important to emphasize that there are no fundamental issues with the Model 3 production or supply chain. We understand what needs to be fixed and we are confident of addressing the manufacturing bottleneck issues in the near-term.”

What does and does not constitute a “fundamental issue” with the Model 3 production ramp is open to debate, but a source tells Daily Kanban that elements of the Model 3 body line are still in development at the Michigan-based supplier Thai Summit America and not yet installed at Tesla’s Fremont facility.

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Tesla: Production Capacity Of Model 3 To Average 226,563 Units Per Year Over Next Five Years

George Orwell famously wrote that “to see what is front of ones nose takes a constant struggle,” and it turns out that the answer to one of the biggest mysteries in the auto industry has been hanging out directly in front of the public’s nose for some time. In a January 2017 application [PDF] for sales tax exemption (STE) from the CAEATFA program, the California Treasurer revealed that

“Tesla represents the Project will launch the Model 3 and provide the capacity to produce and deliver an average of 226,563 units per year over a five year period, in addition to its Model S and Model X production.”

This revelation provides an unprecedented clarity about Tesla’s production ambitions for its “more-affordable” Model 3 sedan, and contradicts representations that Tesla executives have made in quarterly conference calls with analysts and the media.

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Documents Show Tesla Expanding Annual Production To About Half Of 500K Goal

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The Daily Kanban has obtained Tesla’s application [PDF here] to the California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA) for about $100m worth of Sales and Use Tax Exclusion (STE) on its purchase of about $1.2 billion worth of production equipment to be used to produce its affordable Model 3. An analysis of key unredacted portions of this CAEATFA application shows that this massive investment –along with CAEATFA documents related to Tesla’s expansion of Model S and Model X vehicle production— will only increase the electric automaker’s annual production to between 230,000 and 300,000 units per year, well short of the firm’s 500,000 unit per year goal for 2018.

Though Tesla could reach its much-discussed half-million per year production goal through other means, these CAEATFA documents appear to validate Daily Kanban‘s analysis of air quality permits at Tesla’s Fremont plant which indicates a current production limit of about 230,000 units per year.  Tesla has yet to publicize any plans to apply for the new permits or make the new investments required to bring its production rate beyond these limits and towards its planned 2018 rate of 500,000 units per year.

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Tesla Plans Long-Term Expansion Of Model S & Model X Capacity

teslaplant

Throughout its history, Tesla has always been a company that is looking ahead. Even when the company was hand-assembling tiny volumes of Roadsters, CEO Elon Musk’s “Top Secret Master Plan pointed the way towards lower prices and higher volume. Now, with two vehicles on the market and annual production volumes moving towards the six-figure mark, Musk told analysts on Tesla’s most recent earnings call that lower-cost, higher-volume Model 3 is “overwhelmingly our focus.” As for the Model S and Model X, Tesla’s so-called “Gen 2 vehicles,” Musk says “things feel really quite stable.”

That doesn’t mean that Tesla is done investing in its current lineup, however. In fact, the electric automaker’s latest approved application for sales and use tax exclusion (STE) from the California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA) [PDF of CAEATFA’s staff report here] reveals that it is actually spending nearly half a billion dollars in order to expand the production capacity of its Gen 2 vehicles to 195,000 units per year by approximately 2021.

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Tesla’s NOx Problem: Model X Delay Explained?

Model S - Picture courtesy Tesla

As the maker of tailpipe-free electric vehicles, Tesla is perhaps the last auto manufacturer you’d expect to struggle with an NOx emissions problem. Yet like any other auto manufacturer, Tesla operates factories which produce a variety of emissions including the NOx carcinogens at the center of the recent Volkswagen scandal. In fact, Dailykanban has discovered that Tesla has self-reported an NOx noncompliance at its Fremont, CA factory that may be contributing to delays in the production of the firm’s new Model X SUV.

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Tesla’s China problems continue – at least until there is China production

Call toll-free 755-9999 for immediate delivery - of the Model S

Call toll-free 755-9999 for immediate delivery – of the Model S – Picture by Carnewschina

Tesla plans to localize production and engineering in China, CEO Elon Musk told China’s state-owned news agency Xinhua today. When Tesla’s Elon Musk visits a foreign country, he usually drops a hint of building a plant there, probably hoping that the locals go as gaga as the governors of U.S. states. Musk arrived in China to speak at the Boao Forum, China’s answer to Davos. Localization would be possible in three years, Musk said. He wisely did not say it will happen in three years. It won’t. [Continue Reading]

GM Korea: The Twilight Empire

I met a traveller from an antique land
Who said: “Two vast and trunkless legs of stone
Stand in the desert. Near them, on the sand,
Half sunk, a shattered visage lies, whose frown,
And wrinkled lip, and sneer of cold command,
Tell that its sculptor well those passions read
Which yet survive, stamped on these lifeless things,
The hand that mocked them and the heart that fed:
And on the pedestal these words appear:
‘My name is Ozymandias, king of kings:
Look on my works, ye Mighty, and despair!’
Nothing beside remains. Round the decay
Of that colossal wreck, boundless and bare
The lone and level sands stretch far away ~Shelley, “Ozymandias”

Ed note: Jordan Terry of Stone Street Advisors recently asked me on Twitter what I thought of the “bad” situation at GM Korea, noting that it seemed “underreported.” Having written about the subject in the past at TTAC, that was hardly a surprise: not much hard reporting comes out of GM’s “International Operations” black box. That said, there is a broader context here that is underreported, and which I will try to lay out here…

General Motors Korea, formerly GM-Daewoo, has been a key design, engineering and export hub for GM’s global empire since the early 2000s. Specializing in smaller cars, developed and produced at lower price points than GM’s European Opel division, GM Korea was the main conduit for many of GM’s developing-market efforts, as well as the “home room” for many global products. For the perennially small-car- and cost-challenged GM, Korea was the key to offering affordable small cars for export to developed markets like the US and Europe in complete form, as well as in the form of CKD kits for developing market operations like GM Uzbekistan and GM Egypt.

But GM Korea’s long-term problems with union unrest, currency volatility and domestic market sales declines are catching up to it, creating a financial crisis just as it becomes increasingly expendable to the GM Mothership. GM’s deep alliance with China’s SAIC Motors has made GM Korea all but irrelevant to its strategy, and as The General plots its increasingly China-centric future it’s clear that Korea is losing out. With the loss of key export markets and future development work, GM’s once-crucial Korean empire is fading into obscurity and financial woes.

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