Tesla Considers Boosting Model S Production To Meet Demand

Brianman,

I'm curious why you don't agree with the title or assertion? After listening to the earnings call it was fairly clear to me that they will have to do that because I heard,

1. The expected line rate will be well over 20K/yr going into 2013
2. Expected reservation backlog entering 2013 is expected to be ~15K (after the 5K of deliveries).
3. The desired backlog is ~3months (5k at 20K/yr or 7.5K at 30k/yr). Backlogs above this are detrimental to sales/reservations.

To me, it seems clear that they will have to run at a 30K/yr rate until Q3 13 to achieve anywhere near the desired backlog, assuming that reservation rate doesn't continue to increase (which I think will increase significantly when cars really start making it out)

Peter

Edit: I place these production rates as goals, that will take a lot of work to reach with quality. As was noted by Elon, Tesla is production limited and will remain so for the foreseeable future. If only the same could be said for the leaf...

I think the biggest issue is can they boost the rate AND maintain quality. I think they can and would love to see 25k or 30k in 2013

I think the idea that they would increase production to meet demand is actually not news. Secondly, I am interested to see if production can be increased to produce 5000 vehicles in 2012. That is far more important. Otherwise, it's a meaningless comment.

Brianman,

I could have sworn that I heard Elon confirm that production at the end of Dec. will be greater than 375 a week. That is new news AFAIK. They also discussed that the current wait list of a year is too great and hurts sales, and the goal is 3 months. It seems the only way to get that wait list down from a year to 3 months is to change the originally planned production rates upwards, then lower them to meet demand when they finally establish a 3 month wait?

Peter

brianman said:

@bluetinc
In short, Tesla never said anything about boosting production. After repeating querying, they confirmed the theory that the 20k/yr. production rate isn't an upper limit. Further, they never said anything about changing production to meet demand. If anything, they suggested that they wouldn't do that because they want to keep a 3-4 month wait list going.

It's kind of like the "slower" articles/blogs. The press and bloggers love to phrase it as if something has changed -- because it would be news -- when nothing Tesla said implies a change in direction or rate.

Click to expand...

The biggest takeaway from the conference call (for me) is that Tesla is super confident about being able to sell 20k cars next year. As they repeatedly pointed out, they are on track to do that already despite not actually trying to sell cars. As nice as the Tesla stores are, they represent a miniscule retail presence that is almost totally concentrated in the U.S.

Even within the context of the expected fast end of year production rate, operating a second shift, etc. they repeatedly raised the point that Tesla was fundamentally production constrained, not demand constrained.

I agree that this is more "news" than it is an actual change in plans. And I don't think it's fair to hold Tesla to a 30k 2013 number as representing some kind of promise. But I get a sense from the Tesla principles that they think Model S is going to sell a lot more than 20k units if they can get the production issues ironed out in the next couple of months.

Again, the key points for me are that -

1. They are considering, and likely will implement, a build rate that is substantially more than 20k/year, if only to meet their 5k goal for 2012.
2. Despite this increase in output, they are expressing in the strongest possible terms that they are production constrained for the foreseeable future.
3. The above appears to be the case, despite the fact that Tesla has not made a serious effort to address the European and Asian markets, while the marketing effort is still clearly embryonic in the U.S.

What I took away is that Elon is only promising 20k units next year, and but would not be surprised if by the end of next year they were at 30k.

They have a factory that was producing 500k cars/year and you guys wonder if they can produce 20k or 30k cars/year with that said factory?

You guys nuts or something?

The equipment, Steph. They have to buy a lot of equipment to open more production lines. They CAN. But it doesn't happen overnight.

(And I challenge you to not use the word 'idiot' or anything similar for 24 hours.)

bonnie1194 said:

The equipment, Steph. They have to buy a lot of equipment to open more production lines. They CAN. But it doesn't happen overnight.

(And I challenge you to not use the word 'idiot' or anything similar for 24 hours.)

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Yeah, it's the equipment stupid.

Can't they buy any? That would be surprising. And at discount prices in the 2008 outright silly panic?

Or maybe not. Going to bed now.

bonnie1194 said:

(And I challenge you to not use the word 'idiot' or anything similar for 24 hours.)

Click to expand...

Sorry. I failed. Miserably.

Steph said:

Yeah, it's the equipment stupid.

Can't they buy any? That would be surprising. And at discount prices in the 2008 outright silly panic?

Or maybe not. Going to bed now.

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They're waiting for the blue light special at KMart.

bonnie1194 said:

They're waiting for the blue light special at KMart.

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LOL, but I hope they find equipment with better-than-KMart quality :smile:

As I heard it, the increase was definitely news. But I think this is driven by their sense of NEW recent demand, since the launch. George B was definitely brimming with confidence, of the "insanely great" variety. This may be just emotional, and subject to a letdown in the months to come, OR it may be that they have really done analysis of the performance of their new store system and really have numbers to back up these brighter forecasts.

Would it not be cool if Model S overtakes the Leaf in installed base by late next year or sometime in 2014? Not likely, perhaps, but it would be a huge validation of the philosophy of building and selling a "no compromise" EV product.

It's not just equipment either. Elon took the time to point out how non-trivial it I'd to hire and train a second shift.

Citizen-T said:

It's not just equipment either. Elon took the time to point out how non-trivial it I'd to hire and train a second shift.

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Because of all the space they have it would be better to have a second production line on the first shift, as opposed to a second shift, or if you just need a temporary boost in production have two long days a week. Most employees would be glad for the overtime.

Citizen-T said:

What I took away is that Elon is only promising 20k units next year, and but would not be surprised if by the end of next year they were at 30k.

Click to expand...

Very true. They all chuckled when they quoted the 20k number and emphasized that they considered it an absolute minimum. But there were no real promises beyond that.

The key thing to look for is hiring for a second shift. They can work a single shift overtime to make the 5k number this year and end the year at a 30k/year clip, but that isn't ideal if you plan on maintaining that over the long term.

If they don't hire a second shift I think it would be fair to surmise that they would continue in burst mode only until they have whittled the wait list down to their ideal number. But if they do hire a second shift that would indicate to me that they see a level of demand that requires it.

Considering the long lead time involved to hire and prep a second team, that's a relatively near term decision to make if they want to have it available in 2013. It's not a particularly huge expense, especially if they delay the decision until November or December when they will be nearing cash flow breakeven.