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Tesla Ramping Up Fremont Factory’s Model 3 & Y Production To 500,000 Per Year By End Of 2020

Today, Tesla released what was perhaps the most highly anticipated quarterly earnings letter to date, as the factory shutdowns and business impact from COVID-19 put the company’s hope of achieving its first full year of profitability in jeopardy.

The Model 3 bodyshop in Tesla’s Fremont Factory. Image credit: Kyle Field, CleanTechnica

Tesla’s Q2 2020 shareholder letter, released earlier today, and conference call added notable updates on the Tesla Model 3 and Model Y, Tesla’s two highest volume vehicles. The company noted that it continues to invest in expanding production of these vehicles, and Tesla CEO Elon Musk on the conference call emphasized clearly that, “Demand is not our problem.” The company has far more consumer demand than it can supply.

Importantly, Tesla said it was increasing production capacity for the Model 3 and Model Y at its Northern California Fremont Factory, from the current annualized production rate of 400,000 vehicles to 500,000 by the end of 2020.

Tesla has been upgrading the Fremont Factory to support the production increase. The letter did not specify what equipment was being added, but simply stated that, “We are installing additional machinery at the Fremont Factory, which is expected to increase total Model 3 / Model Y capacity from 400,000 to 500,000 units per year.”

The Model Y has been the most successful production ramp in Tesla’s history, achieving profitability in its first quarter of production. In the second quarter, Tesla completed the vertical production ramp of the Model Y, including having to absorb the hit from the coronavirus crisis, which shut down Tesla’s Fremont Factory for nearly 6 weeks. The rapid production ramp of the Model Y directly supports the bottom line of the company, with Tesla CFO Zachary Kirkhorn noting on the call that in Q2 “we did see a pretty substantial improvement in the Model Y margin.”

Beyond the expansion at the Fremont Factory, Tesla continues to build out its global production base for the Model Y. At Giga Shanghai, Tesla is nearly finished with the construction of the Model Y production factory, and at Giga Berlin, Model Y production will start when the factory begins producing vehicles.

Tesla confirmed on the call that the next Gigafactory after Berlin will indeed be just outside of Austin, Texas, where it will produce the Cybertruck, Semi, Model Y, and Model 3. It’s clear Tesla sees a significant opportunity with the lucrative compact utility vehicle and is aggressively expanding production around the world to capture as much market share as possible.

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I'm a tech geek passionately in search of actionable ways to reduce the negative impact my life has on the planet, save money and reduce stress. Live intentionally, make conscious decisions, love more, act responsibly, play. The more you know, the less you need. As an activist investor, Kyle owns long term holdings in BYD, SolarEdge, and Tesla.

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