How long could the model 3 be delayed before Tesla would be in serious trouble?

daniel Ox9EFD · Nov 29, 2014

The model X was delayed a few years, and Elon mentioned a 'OCD on details of a product', so this is a fair question to ask.

My best guess would be that mid 2018 first deliveries would still be manageable, but not much longer. And that is for financial reasons, not due to competition (on the competition front they have more time).

RobStark · Nov 29, 2014

Roadster was Tesla's first car.

Model S was Tesla's first car it manufactured itself.

Model X development included AWD and Falcon doors. Elon in 2012 predicted 20k units would be global demand for Model S and Model X would be needed as Panasonic ramped up production for enough cells for 50k Gen II cars per year. Turns out X was not needed to get to annualized 50k unit rate and it took the pressure off to deliver Model X.

Initial cell production at the GF starts in 2016 and significant volume in 2017. It is assumed that Model 3 is needed to have a product to sell those battery cells.

Some hyper bulls suggest Tesla could sell 100k Model S and 300k Model X per year or some combination that totals 400k Gen II units per year.

If that is the case Model 3 could be delayed til 2020. If combined demand for Gen II is more like 150k then Tesla really needs to launch Model 3 in 2017.

Model 3 will use the front drive train from P85D as its base drivetrain it seems. No fancy doors. No pano roof or retractable handles to introduce. No new ground breaking feature, at least on the base. No significant engineering design hurdle to overcome. Just basic stuff.

Introducing and manufacturing 50k units per year should not be that difficult. Getting to 500k units per year will be a logistics and manufacturing hurdle to overcome.

30seconds · Nov 29, 2014

Why would they use the front drive train? I think most people would say rear wheel drive has better performance characteristics and if you need additional traction then go AWD.

RobStark · Nov 29, 2014

They will use the P85D's front 221 hp motor and inverter with a different ratio for its reduction gear in the rear for a standard Model 3 RWD unit.

For Model 3 AWD they may use the S85's 188 hp units or some other less powerful units altogether.

green1 · Nov 29, 2014

Tesla wouldn't be in trouble no matter how long the delay, they're profitable right now. That said, an extended delay would be very hard on the stock price as some amount of success is already built in.

Zzzz... · Nov 29, 2014

Tesla is on its way to sell 150k units of S and X. With this volume Tesla would be on par with Porsche volume from few years ago and massively profitable. In 200x Porsche was making $2 billion a year in profits on ~100k volume.

bluenation · Nov 29, 2014

as much as id love to see model 3 as soon as possible, i still have to look at tesla's history....

i predict early production m3 by 2017, mass production 2018. Not a minute earlier.
And expect some early production niggles in the first few thousands of units.

RobStark · Nov 29, 2014

bluenation said:
i still have to look at tesla's history....

Yeah, because Tesla has not grown in employees nor competency in the last 10 years.

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green1 said:
Tesla wouldn't be in trouble no matter how long the delay, they're profitable right now. That said, an extended delay would be very hard on the stock price as some amount of success is already built in.

Tesla can't have a significantly underutilized $5B asset just sitting there.

In 2017 it is contractually obligated to keep buying Panasonic cells from Japan,otherwise Panasonic would not have invested in the GF.

So by 2017 Tesla needs to blow by 150k units to at least 200k units.

green1 · Nov 29, 2014

Tesla can't have a significantly underutilized $5B asset just sitting there.

In 2017 it is contractually obligated to keep buying Panasonic cells from Japan,otherwise Panasonic would not have invested in the GF.

So by 2017 Tesla needs to blow by 150k units to at least 200k units.

Not a problem. Even if they scrapped plans for the model 3 they'd have no problems using all those cells in stationary storage applications for superchargers, solar city, public utilities, etc. Gigafactory is a drop in the bucket of worldwide demand for cheap batteries.

I want tesla to succeed with the model 3 as much as the next guy on here, I'm just pointing out that it is not as critical to Tesla's survival as some people think.

RobStark · Nov 29, 2014

green1 said:
Not a problem. Even if they scrapped plans for the model 3 they'd have no problems using all those cells in stationary storage applications for superchargers, solar city, public utilities, etc. Gigafactory is a drop in the bucket of worldwide demand for cheap batteries.

Yes, there is a problem. Because the energy storage market is much more competitive than the roadworthy 200 mile plus BEV market and likely far lower profits. Because of brand equity Tesla will have pricing power in the auto market if not downright monopolistic pricing power for quite a while.

Not so with energy storage. Southern California Edison will not pay a premium for Tesla batteries because Tesla is cool or they think Elon Musk is cool. Or even because they have superior customer service experience vis-à-vis their supercharger network. The financing including the $2.3B in convertible notes presupposes Model 3 profits. Substituting more Model S and X profits will do just fine but not energy storage, that is filler or icing on the cake not the cake. The GF business plan was not to invest $5B to go into direct competition with LG Chem,Samsung SDI, and the Chinese.

bluenation · Nov 30, 2014

tesla has made/is in process of making three cars. of those, three of them suffered multi-year of delays. 0 tesla cars suffered no delay. I understand the reasoning that m3 wont bring any new tech to the table, thus "eliminating" delays. Im not so convinced that's the case. Actions speak louder than words.

ill be buying the m3. In fact, i want it now, and ill be the happiest dude if it comes earlier than i thought. But this will be their first mass production vehicle. The first vehicle where, their excellent customer service will finally be put to the strain, their lack of dealers put to the true test, and their superchargers will be put to max (overload?) capacity. The first vehicle where, quality is not the only thing that matters; suddenly quantity matters, too. Any major drivetrain issue will thus wound them. THat's where the delays for extra prep and testing come in.

point being, "lack of new tech" is not the only source for delays.

My 2018 mass production timeline stands.

dauger · Nov 30, 2014

bluenation said:
ill be buying the m3. In fact, i want it now

A lot of friends I know have that same feeling. Two are Leaf owners trying to figure out how to hold out until 2017. Others are Prius and gas car owners watching. Several strangers whom I meet when I park my S will ditch their gas cars as soon as Model 3 is out.

My informal survey leads me to believe demand for Model 3 is already well-stoked, and expectations around it are high, so its delay could hurt Tesla's reputation and mindshare in this market. The S has created a huge halo effect, speeding Tesla Motors towards accomplishing its mission, but I'm concerned a Model 3 delay will kill off that goodwill. The Model X delay matters only to the extent it implies a Model 3 delay, which thankfully most of these prospective buyers don't read in too much.

As for Tesla's survival, a one or two year delay probably is okay. But to best accomplish the TM mission, short of delivering Model 3 today, 2017 delivery would guarantee Tesla continues to shape the car market towards that mission. If a $5B investment isn't enough incentive to keep Model 3 on track, perhaps preventing an old-school car company like GM from guiding BEVs towards their own agenda is. I'd much rather see TM in that driver's seat. For now, I can argue that others' 200-mile BEV is far more vaporous vaporware than Model 3 is.

To TM: please don't be late.

Chickenlittle · Nov 30, 2014

daniel Ox9EFD said:
The model X was delayed a few years, and Elon mentioned a 'OCD on details of a product', so this is a fair question to ask.

My best guess would be that mid 2018 first deliveries would still be manageable, but not much longer. And that is for financial reasons, not due to competition (on the competition front they have more time).

It doesn't surprise me that someone posted this. What surprised me is that 11 people responded to it

blakegallagher · Nov 30, 2014

RobStark said:
Yes, there is a problem. Because the energy storage market is much more competitive than the roadworthy 200 mile plus BEV market and likely far lower profits. Because of brand equity Tesla will have pricing power in the auto market if not downright monopolistic pricing power for quite a while.

Not so with energy storage. Southern California Edison will not pay a premium for Tesla batteries because Tesla is cool or they think Elon Musk is cool. Or even because they have superior customer service experience vis-à-vis their supercharger network. The financing including the $2.3B in convertible notes presupposes Model 3 profits. Substituting more Model S and X profits will do just fine but not energy storage, that is filler or icing on the cake not the cake. The GF business plan was not to invest $5B to go into direct competition with LG Chem,Samsung SDI, and the Chinese.

I don't believe this is right. Tesla can currently sale stationary storage for a profit. If they can cut their cell cost by 30 percent + whatever new chemistry they go with they will have a very huge market to sale into. There really is no competition b/c nobody will have the cost that they do. From Utilities to Large Businesses the size of that market is hard to wrap my mind around. They also have an added bonus of having Solar City's Giant sales force selling the batteries for them.

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dauger said:
A lot of friends I know have that same feeling. Two are Leaf owners trying to figure out how to hold out until 2017. Others are Prius and gas car owners watching. Several strangers whom I meet when I park my S will ditch their gas cars as soon as Model 3 is out.

My informal survey leads me to believe demand for Model 3 is already well-stoked, and expectations around it are high, so its delay could hurt Tesla's reputation and mindshare in this market. The S has created a huge halo effect, speeding Tesla Motors towards accomplishing its mission, but I'm concerned a Model 3 delay will kill off that goodwill. The Model X delay matters only to the extent it implies a Model 3 delay, which thankfully most of these prospective buyers don't read in too much.

As for Tesla's survival, a one or two year delay probably is okay. But to best accomplish the TM mission, short of delivering Model 3 today, 2017 delivery would guarantee Tesla continues to shape the car market towards that mission. If a $5B investment isn't enough incentive to keep Model 3 on track, perhaps preventing an old-school car company like GM from guiding BEVs towards their own agenda is. I'd much rather see TM in that driver's seat. For now, I can argue that others' 200-mile BEV is far more vaporous vaporware than Model 3 is.

To TM: please don't be late.

For as many cars as Elon oversees and Tesla Delivers on they can delay as long as they want and it wont matter. It might cause them to get fewer reservations down the road since people expect delays but I doubt even that would happen because each car Tesla delivers on builds the expectation that the next one (however delayed) Will be spectacular. I plan on reserving the Model 3 the first day It is announced and I hope I can buy a model X before I get my Model 3

.

I would love the car to be on time and think that is a possibility but don't really care much if they delay to make it even more amazing. I plan on owning the car forever so I hope its really cool right out of the gate.

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Chickenlittle said:
It doesn't surprise me that someone posted this. What surprised me is that 11 people responded to it

12 !

daniel Ox9EFD · Dec 1, 2014

Chickenlittle said:
It doesn't surprise me that someone posted this. What surprised me is that 11 people responded to it

are you implying that a delay will not affect Tesla?

Robert.Boston · Dec 1, 2014

While Tesla's corporate survival isn't threatened by a year-or-two delay of the Model 3, such a delay would have impacts.

Delaying the acceleration of corporate profits that will follow the Model 3 introduction will hurt the stock price. However,
- The stock price already reflects some expectation of delay, and
- The reality of a great Model 3 with a $35k price tag could be a big upward catalyst for the stock price.
Delay gives other automakers a bigger window to enter the market and take share away from Tesla. Remember the Audi e-tron, which Audi pulled after seeing that it was vastly inferior to the Model S? If the Model 3 hits before Audi and/or other companies with rumored "Tesla killers" can get to market, it will make those new entries look very lame.
There must be a saturation point for Model S/X growth. We're still a long way from that point, but the company can't grow indefinitely without new models to address new segments of market demand. The Model 3 development cycle is being be closely watched as an indicator of how long it will take Tesla to develop other products (e.g. pickup trucks, delivery vans) that will carry on the company's growth long term.

VolkerP · Dec 1, 2014

good points everyone.

Tesla's mission is to accelerate the advent of electric cars. Tesla will never accumulate enough capital to turn over a global industry producing 100m cars a year all on its own. In clear sight of this, Elon announced to spur the other car markers going electric. There is already high pressure in the premium sedan segment from Model S. Sales for Audi A8, BMW 7 series, Merc S and so on took a dent. With P85D, Model S rules the drag strip and it will rule the left lane on the Autobahn (at least for a few miles). Even in Germany, this spurred interest.

So there is no harm to Tesla's mission when doing Model S, Model X from next year on, and slowly ramp up forever. The premium car makers already take notice. But the GigaFactory and Model 3 launch will be a last warning shot for the fence sitters.

Red Sage · Dec 2, 2014

Wow. Really amazes me how many people are resigned to the notion that Tesla Model ☰ is practically a fiction, destined to be indefinitely delayed. Cool. The fewer of you believe, or make reservations, the sooner I'll get mine.

aronth5 · Dec 2, 2014

Red Sage said:
Wow. Really amazes me how many people are resigned to the notion that Tesla Model ☰ is practically a fiction, destined to be indefinitely delayed. Cool. The fewer of you believe, or make reservations, the sooner I'll get mine.

I think the number of people who believe it is fiction is relatively small although unfortunately somewhat vocal. Once the X is out I think a lot of negativity will go away.

Red Sage · Dec 2, 2014

aronth5: Indeed. It's just that it astounds me how the sentiment seems to permeate discussions even on enthusiast pages. There is a point where realism, pragmatism, or pessimism crosses the line to being naysayer. I can understand why people would be concerned, and they certainly have a right to express those concerns. But it amazes me that some would prefer to give up on the very possibility of success at such an early juncture.

How long could the model 3 be delayed before Tesla would be in serious trouble?

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