Reading Between the Lines

Reading Between the Lines

Here are a few thoughts I have based on things Tesla has said and my understanding of what they are trying to accomplish.

Some tidbits:

There are two lines production lines at Fremont plant. The original Model S line and the new Model S/X line.
New factory line being used for both Model S/X.
Cautions during earnings call that supplier delays could result in 800 fewer cars built in 2015
Rapid rise in production towards end of 4th quarter
50K-55K production target for 2015
Gigafactory 1 will begin initial production in 2016
Gigafactory 1 is "like a product" that can be replicated
Potential to build Model 3 in multiple locations

According to various factory tour reports, the new Model S/X line is a complete second line, apart from the original Model S line.

I was somewhat surprised that Tesla shifted Model S production onto the new combined Model S/X line. I had expected that they would continue to build Model S on the original line until the Model X ramp had completed. This would have diminished impacts to Model S production and let them focus on Model X production on the new line. However, this strategy would have likely caused some delays when shifting Model S production to the new line during a time when they would be trying to maximize Model X deliveries.

Taking the time now to validate the new line for Model S and ramp both models on the new line makes sense for a smoother delivery flow in 2016. This also makes sense in terms of accelerating Model 3 production. I believe that by shifting all current production to the new line, they can give the Model 3 engineers a production line to begin building Model 3s on. It would seem to me that having access to that facility would enable them to build prototype cars more quickly and iterate on design choices rapidly.

The ramp for the Model S and X to reach 80-90,000 cars (combined) in 2016 will be helped by the initial output of the Gigafactory. Over the next 5 years, the ramp of Gigafactory output will pace the ramp of overall Tesla production. Throughout this five-year ramp, a percentage of the Gigafactory output will also go towards Powerwall and Powerpack production. If I recall correctly, the new line is supposed to be able to get up to 150,000 or so Model S/X per year. Model 3 will ramp to approximately 350,000 over a 2-3 year period--but I don't think that will be on a single line.

The Gigafactory is designed with multiple production lines. It is flexible so that some lines can handle different chemistries. And it is being built as a product so that they can build more Gigafactories as the capacity is needed. Applying that same thinking to the Model 3 production, I think they will build multiple parallel lines to produce the Model 3 in volume. One or more of those will be in the Fremont plant, but once they've proven the build process, they should be able to "productize" the factory line and replicate it in other locations--either domestically or abroad.

2015 Production
I am thinking that production of both Model S and Model X are going through a ramp on the new line. Model S will be a rapid ramp during August and early September bringing it back up to 1000/week. I think the Model X begins production for deliveries (vs. testing and demonstrators) in the last week of August, producing 100/week, possibly ramping to 200/week in the last couple of weeks in the quarter. This puts combined Model S/X production approximately the same as Q2 with total cars per week exceeding 1000 for part of September.

In Q4, Model S production gets cut back to 800/week, with more time being spent on ramping Model X production--hitting 800 Model X per week by December. Total X produced in 2015 around 8000. Total Model S around 43300 for a total combined of 51300, sitting comfortably in the range guided on the earnings call.

Since a one week slip anytime during the ramp due to supply issues will push a week's production off the end--that week delay would cause a loss of approximately 800 cars--as mentioned in the earning call. If the delayed part is one that is shared between S and X, then that could also affect S deliveries by a similar amount and could bring the number down closer to the 50K lower guidance.

eric.zucker | 13 augustus 2015

@johnse - very interesting post.

I would upgrade both lines to S/X. Maybe that's why S production was moved to the new line.
Or maybe just to work out any potential issues.

China is protecting its own market by not providing any incentive on imported EV . If you want sales in China, cars need to be manufactured there. I would build something, even though the risk of being massively copied is a quasi-certainty.

I only wish 8000 MX would be produced this year. This would be the best possible scenario.

aljjr2 | 13 augustus 2015

It would appear (some stated) that the X will have "improvements or features" not currently on the Model S. One potential rationale for moving the Model S production to the New Model S/X line is to validate the build of Model S with the same features forthcoming on the X, and to cut the "old" Model S line over to the similar capability.

I anticipate an announcement upgrading the Model S will occur just before the Model X launch. Keeping any changes under wraps maintains the Model S order backlog. Recall the consternation when the Autopilot came out last October from those who got their Model S's at the end of September.

The Tesla "Catch 22" -- no inventory and thus no distinct model year choice (save date of build). With conventional dealers, one can choose to buy a 2015 or 2016 model car as calendar year-end approaches--comparing savings (discount and incentives) over new model upgrades. No such opportunity for Tesla buyers, since cars are built to order.

My prediction is an upgrade announcement to the Model S, followed by spec release of the Model X. The 90KW Battery option (IMO) was the first.

aesculus | 14 augustus 2015

Actually AWD was probably the first :-)

DriverZ | 14 augustus 2015

Why on earth is anyone buying/configuring an S right about now??

@aljjr2 "I anticipate an announcement upgrading the Model S will occur just before the Model X launch. Keeping any changes under wraps maintains the Model S order backlog. Recall the consternation when the Autopilot came out last October from those who got their Model S's at the end of September."

Like in that quote above, everyone keeps saying that Tesla is keeping the Model X specifications secret so that they don't cannibalize their model S sales. Either:

A) because the X is going to have features that the S does not, so people will stop ordering S's and only order X's after the announcement, or

B) because they will roll the features over to newer S's bought after the announcement, but there will be some cut off where those who ordered their S's too soon miss out (like with Autopilot)

Either way, we know that some big announcement is about to be made which has the potential to completely change a customer's mind about how happy they were spending >$70,000 on an S - either they would not want it anymore or they would regret not waiting for the announcement of new features.

So why on earth is anyone still configuring their S? Unless they must receive it by a certain deadline, like a lease expiration, the smartest thing to do right now is wait for the X announcement to see if that changes your mind about the S or to see if your patience pays off with new features.

And as long as keeping things a secret pays off for Tesla in terms of extra S sales, they will drag their feet on the X release as long as they can. People need to vote with their wallets and stop buying S's until the X is revealed. That is the best way to indice Tesla to actually release the information - and the best way for customers to insure the maximum hippiness out of their purchase.

NumberOne | 14 augustus 2015

If you ask me, all of the new features are already being built into Model S, it is simply not active, and would probably come at additional cost. A good example being the Autopilot feature. All Model S cars are Autopilot ready, but enabling the feature costs an additional $2,500. With any new secret feature it would simply be a matter of making it operational. There are of course other considerations which would make some features available only on Model X.

dcpalmer | 14 augustus 2015

@LeonardD: Some of the MX spy shots appear to show an active rear spoiler: something that might well make its way to a future Model S. | 15 augustus 2015

There is a lot of manual labor involved in assembling the guts of the cars-wire harnesses, electronic control modules, interior trim etc. This augurs for splitting the line that builds up the chassis structures that the two cars have in common into two assembly lines, one for X and one for S for the rest of the assembly work. But I have never built a car except for Aurora models and those didn't turn out so well.

Remnant | 29 augustus 2015

One obvious new requirement for both MS and MX is a high-current recharging mode to match the Chilled-Cable Upgrade (CCU) of the superchargers, already under way.

In the CCU mode the recharge downtime is likely to shrink to 10-15 minutes, that is, close to the average ICE refueling downtime.