There are a LOT of inefficiencies that Tesla is addressing right now. Listen to Elon on the Khan Academy video. He talks about the production line being held up because of a late shipment of $3 USB cables from China. Lots of things like this happen when production is ramped up. Since Tesla is manufacturing several of the components of the car, perhaps they expect the processes to get more efficient and cheaper later in the year. This could have a big impact on cost and profit.
Those inefficiencies matter only insofar as they decrease production rates and increase labor costs (and at the margins, material costs). Where is the evidence that they have been operating at greater than 50 hours per week? In Q4 we knew they averaged at least 70hrs/week because Elon told us, and we had repeated reports of most workers working 80 and 90 hour weeks, and again this is something that Elon himself mentioned. Heck, his comment was that he was encouraging that workers work on Sundays, but not requiring it. This in an environment where everyone was working 12 hour days.
They were also doing this with hundreds of temp workers on the payroll, and basically hand building all of the cars through November. In December they fired up regular production and put out ~1,200 cars in the last 3 weeks of the month with the same level of company wide effort. This bloated payroll was sustained for the entirety of Q4 in order to produce a total of ~2,400 cars, so if you are doing projections from Q4, recall that Tesla took 10 weeks to produce ~1,200 cars, then 3 weeks to produce another 1,200. Think of weekly labor costs being the same in the 1st week as they were in the 13th and you will be closer to the reality of the situation than if you attempt to average unit labor costs over the quarter.
We have no evidence of any of this being a "feature" of Q1. By the February conference call they were talking about maximum 50 hour work weeks being the norm and the rapid elimination of temp positions throughout the company.
The key thing to understand is that the vast majority of labor costs in Q4 (and indeed Q3) were being spent while producing all of the pre-production founders cars, press vehicles, store displays, Signature Series cars, etc. They flipped the switch on General Production in December and doubled their production for the year. There is no need to suppose that the vast labor investment prior to flipping that switch had much relation at all to their production rate after the switch was thrown.
They were certainly working massive amounts of overtime the last few weeks of December, but we don't actually know it was needed to produce the cars. They were in end of quarter emergency mode and a lot of their extreme QA measures might have been continuing more out of momentum and hyper vigilance than actual need. What we know is that Q4 cars were being delivered with 100+ miles, while Q1 cars were being delivered with 10-15 miles on them. And the reports of super human efforts at the factory basically ended in January. I think most of the "excess" labor effort was gone by February at the latest.
My first pass guesstimate is that unit labor costs on the production line might well have declined (conservatively) by 40-60+% by the beginning of February. Then they moved to 500/units/week at the end of February. Maybe they increased hours to do that, but how much? It seems clear it didn't take a super human effort like they were doing in Q4. If they managed to increase production with substantially the same labor inputs, then that is another ~25% reduction in unit/labor on top of the baseline reductions.
I think they also wrung a lot of the unit delivery costs out of the system by February, such that the increase in production rate would have then resulted in a linear increase in unit costs from the lower baseline. Regardless, delivery flows were exceedingly smooth compared to anything achieved in Q4. It's certainly possible to smooth the flows with increased man hours, but the actual delivery process largely switched from home delivery to central pickups, which you would expect to substantially reduce labor inputs.
I just can't get it out of my head that 10-15% GM for the quarter looks like a credibly conservative estimate BEFORE adding in credits. And it was much closer to 20+% in the month of March. If Elon told me they hit 30% in the month of March it would not shock me.
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So, it all began in 1970 with the Clean Air Act.
After all these years only 12 states have stepped forward, and have really done something with it.
What about all the other states?
How do they think about clean air?
The Clean Air Act covers all 50 states. However, at the time that the Clean Air Act was passed California already had already established their own clean air laws. Those laws were grandfathered into the Clean Air Act, so you had the U.S. rules, and the California rules. The CAA also allowed other states to adopt California regulations if they got a waiver from the EPA.
In general, California has had more stringent rules, but its not totally safe to assume that in all circumstances.
