Tesla just issued its Q3 2019 earnings report and the numbers are looking good across the board for the Silicon Valley electric vehicle builder.
Robust Production Numbers
Tesla achieved record production and delivery numbers in Q3, with 96,000 vehicles produced and 97,000 vehicles delivered in the quarter. This follows a trend of Tesla pushing to increase its production and delivery rates quarter on quarter and year on year, with some fluctuations in the mix coming from the seasonality of the automotive sales cycle.
For the year, Tesla is confident it is on track to achieve the annual delivery guidance it provided earlier, noting that, “We are highly confident in exceeding 360,000 deliveries this year.” 360,000 is the lower end of the annual delivery range guidance, with an upper limit on the annual production target of 400,000 vehicles delivered in 2019.
With the variable of the start of the Shanghai Gigafactory playing a role in that mix, the cautious guidance is a welcome change from the overly optimistic blue sky targets Tesla has been known to provide in the past — assuming it is indeed cautious guidance.
Looking ahead to 2020, Tesla notes that it is still planning to produce limited volumes of the Tesla Semi in 2020. That’s a slight slip in timing from the first Semis rolling off the production lines by the end of 2019, but with Semi being a completely different beast than its passenger vehicles, the ramp up of production and vehicle qualification will understandably take longer.
Finally, Tesla is again bringing Gigafactory 4 back into focus with news that it hopes to begin production at the yet-to-be-announced location in Europe in 2021. Using the Shanghai Gigafactory’s construction timeline of 10 months, that gives Tesla another year to find the location and start construction. More realistically, construction in Europe will take slightly longer than in China but we still do not have a firm location from Tesla at this point.
Trial Production Begins In Shanghai
Tesla’s teams in China have been on a warpath to get its first automotive factory outside the United States up and running, and the Q3 2019 earnings report confirms that the factory is up and running on a trial basis. As we have seen from various leaked photos posted to various social media outlets, Tesla is already producing the first Made in China Model 3s at the new factory.
The news comes after just 10 months of construction to transform what was infamously just a muddy lot into a fully operational, state of the art electric vehicle factory. The feat was achieved using locally financed debt and at a financial efficiency level that is simply mind-boggling. Tesla said in the earnings report that, “It was ~65% less expensive (capex per unit of capacity) to build than our Model 3 production system in the US.”
Validating its ability to replicate the production lines for the Model 3 in Shanghai at such unprecedented financial efficiencies gives Tesla the right to move on to the next 1, 2, or 3 Gigafactories around the world with cookie-cutter-like precision. Sure, a bit of dough may be lost here and there, but at the end of a year, you can bet the thing is going to be spitting out cars. Tesla put it like this: “We are positioned to accelerate our growth further through Gigafactory Shanghai, Model Y and also through increasing build rates on our existing production lines.”
Updates from Tesla:
- We are already producing full vehicles on a trial basis, from body, to paint, and to general assembly, at Gigafactory Shanghai. We have cleared initial milestones toward our manufacturing license and are working towards finalizing the license and meeting other governmental requirements before we begin ramping production and delivery of vehicles from Shanghai.
- China is by far the largest market for mid-sized premium sedans. With Model 3 priced on par with gasoline-powered mid-sized sedans (even before gas savings and other benefits), we believe China could become the biggest market for Model 3.
Tesla Model Y Ahead of Schedule
The Tesla Model S was a game changer. The Model X redefined the SUV as a desirable electric vehicle with wings. The Model 3 took the promise of Tesla to the masses and the Model Y is poised to blow the roof off of the mainstream automotive market. Tesla has taken all the steps required to get to this point and now it is pulling up to the main table of the global automotive market, napkin tucked into its shirt, fork in one hand and a razor sharp knife in the other.
The Model Y is the form factor people are buying right now and Tesla just confirmed that it is not only on track, but “ahead of schedule, production expected by summer 2020.” They are hungry and the lazy giant that is the mainstream automotive market has nothing in the pipeline that any of the majors can deliver that comes remotely close to the promise of the Model Y. Even if it could cobble something together in the next few months, it would be unable to deliver them at the scale Tesla will.
By next summer when Model Y production fires up, Tesla will have fully functioning production lines in Fremont, California, with more lines being installed in parallel at its Shanghai Gigafactory. As of today, “Model Y equipment installation is underway in advance of the planned launch next year. We are moving faster than initially planned, using learnings and efficiencies gained from our Gigafactory Shanghai factory design.”
Updates on Tesla’s Fremont Automotive Factory:
- Model Y equipment installation is underway in advance of the planned launch next year. We are moving faster than initially planned, using learnings and efficiencies gained from our Gigafactory Shanghai factory design.
- Capex per unit of capacity is forecasted to be about 50% lower than our current Model 3 production system in the United States.
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