https://www.bloomberg.com/news/articles ... -s-model-3
Five Things Wall Street Wants to Know About Tesla’s Model 3
All eyes are on the affordable electric sedan and whether production stumbles will continue.
Tesla Inc. reports third quarter earnings on Wednesday after the market closes. All eyes will be on news of the mass-market Model 3 and the electric car’s slower-than-expected production. What with SpaceX launches, Boring Co. tunnels, and even dark warnings about the threat of artificial intelligence, Chief Executive Officer Elon Musk already has a few irons in the fire.
But Tesla is the center of the Muskian universe, and the second half of 2017 was to be the test of whether he could make enough Model 3s, and make them fast enough, to justify the billions of dollars already spent. So far, things haven’t been going that well.
Wall Street analysts will likely have some questions.
1. What exactly are the “production bottlenecks” and are they primarily at Tesla’s gigafactory?
Tesla reported earlier this month that it had made just 260 Model 3 electric sedans in the third quarter, well below its 1,500-unit forecast, citing unspecified “production bottlenecks.” While much of the speculation has centered on the company’s auto plant in Fremont, Calif., its gargantuan facility in Nevada—where the batteries are made—is also a critical part of the production story. In an August letter to shareholders, Tesla stressed that the Model 3 drive units, as well as battery packs made with new cells, are being built on new manufacturing lines at the Gigafactory outside Reno...
2. How much cash has Tesla spent?
Tesla had roughly $3 billion in cash on hand at the end of the second quarter and tapped the debt markets in August, raising $1.8 billion in its debut bond sale. The company has always expected to spend heavily in the second half of the year on the Model 3 as kinks in the lines are worked out and production accelerates.
“We hope for a more detailed plan for the company’s expected cash burn,” wrote analyst Jeffrey Osborne of Cowen & Co. LLC in an Oct. 19 research note. The company “still has not provided a realistic plan for [capital expenditures] that reflects both the company’s ambitions as well as cash generating ability.”...
IMO, the first two questions above and their interrelation are far more important than the others that you can see at the link.
TSLA has promised investors ~ a $ billion dollars a month in revenue from model 3 sales by December.
Obviously, the most significant question tomorrow will be how small the fraction of that amount will actually be delivered.
As to question #1 above, if the very detailed
report below is correct, It will be very difficult for TSLA to provide answers tomorrow that any investor, supplier, or model 3 reservation holder will want to hear:
https://dailykanban.com/2017/10/source- ... ction-hell
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).
“Tesla was in disarray when it came to knowing what they wanted,” the source tells Daily Kanban. “Manufacturing engineers were pressuring us to work on a design that was not yet approved.” Turnover in key positions at Tesla contributed to the chaos, as lessons learned during previous work on the joint Model S/X production line were lost with departing employees.
Despite Tesla’s public claims that the Model 3 would be “designed for production,” disagreements between its own designers and engineers contributed to five revisions to the Model 3 line design before a PO was even signed. At least four more revisions came after the PO was signed, forcing Tesla to pay extra for delivery on a compressed timeline. Even with these delays, the supplier was ultimately able to deliver on Tesla’s timeline.
In addition to the compressed deadline and high volume of design revisions, the Model 3 practice diverged from standard industry practice in that it was a so-called “cold build.”...
The “cold build” approach that Tesla took with the Model 3 BIW transfer line skips the supplier testing step, meaning the line was shipped to Fremont for installation at Tesla’s plant without having been validated, the source said.
Because of the compressed timeline and “cold build,” Tesla’s first Model 3 line will likely require more debugging than usual and could even require post-installation modification. That work must all take place at Fremont, requiring Tesla to pay for travel and overtime for the supplier’s highly skilled engineers. That installation and debugging work is ongoing according to the source, who confirms that Tesla has not yet built a Model 3 using the automated tooling....
Work on the the second Model 3 line, which the tooling supplier had originally planned to build and install in the second half of this year, has not yet begun. The supplier has been told that there is not enough room at the Fremont plant to install the second line, which was supposed to double Tesla’s Model 3 production capacity. It is not clear how or when Tesla will find the room for the second line.
Wards Auto has reported that Tesla needs a second body shop, in order to support the production volumes that CEO Elon Musk has forecast. “I understand they’re talking about a second body shop,” a “source in position to know” told Wards, “but I can’t see them reaching 2,500 to 3,000 weekly until the end of next year.”
Tesla has not responded to Daily Kanban’s repeated requests for comment.
Earlier version of that article had the better headline:
https://www.thestreet.com/story/1436168 ... treet.html
Overly Optimistic Tesla Bulls Are the Dumbest Thing on Wall Street