Day 04: Four calling birds | Model Y made at 4 factories
Part of
12 Days of Christmas - Tesla Edition a series (c) by the Artful Dodger, Dec 2023
Over this Yuletide season, I will post a daily installment focusing on Tesla products, past, present, and future (please note that I will express
major themes as short-hand bullet points, or I will run out of
Yule before the
tide goes out). Here's the series so far:
Day 01: A Partridge in a Pear Tree | Roadster Proof of Concept
Day 02: 2 Turtle Doves | S/X Fraternal Twins go Mainstream
Day 03: 3 French Hens | Model 3 Bets the Company
Intro to Part 4: Model Y made at 4 factories
Model Y was intended to become the first car manufactured at Tesla factories around the world. Thus, it needed to have mass market appeal, great value, good manufacturability, and parts commonality.
The Early Model Y: Fremont, California
- Initally, Elon wanted Model Y to be built on an entirely new platform, but wiser heads prevailed at Tesla's Board and the decision was made to share the now proven Model 3 platform with 75% parts in common (esp. the motors, power electronics, software, and interior fitments)
- this wise decision allowed Tesla to begin deliveries of Model Y cars built at the Fremont factory a full 6 months earlier than was expected after the (low-key) reveal event held on Mar 19, 2019
- the big leap forward in manufacturing tech for Model Y was the "gigacasting" where the entire rear frame was produced in a single shot in a 'house-sized' casting machine (gigapress), replacing the 170-odd pieces of welded stamped steel which had vexed the Model 3 ramp, and amused Sandy Munro.
Lesson 1: Build for Manufacturability, Build from Common components
Lesson 2: Very large CapEx spend can be economical if a product in build in volume
Three More Factories: Shanghai Phase II, Giga Berlin, and Giga Texas
1. Giga Shanghai: "
Tesla Speed"
- the Model 3 plant (Phase 1) was at 250K/yr installed capacity by the time the decision was made to expand the factory to build Model Y in China. In amateur drone footage, we witnessed the project rise from an empty space to a fully built factory in less than a year (and then double again the next year)
- Concurrent with the construction of the new factory, localized parts suppliers were adding or creating capacity for the new product, located mostly within 30 miles of Giga Shanghai (Lingang). This led to Tesla achieving over 90% parts localization, with enormous benefits in logistics and COGS
- Great credit should be given to the Tesla China team who worked through two massive disruptions during the pandemic. Inflexible policies were met with agile management and a willing workforce, so that Tesla not only continued production, but they massively outperformed their competitors. Kudos. Profits.
Lesson 3: Go Big, or Go Home
2. Giga Berlin: "
Water is for Fighting"
- Wasser, wasser everywhere, and not a drop to drink: faux enviromental lobby groups (bankrolled by the German car industry) made the decision early on to attempt to delay the construction of the Tesla factory in Brandenberg
- Lawsuits, public herrings, and do-overs were the agenda for years, but inevitably Giga Berlin rose to completion and production began with 2170 battery cells imported from China resulting in 2-shifts, 6-days/wk and 375K/yr nameplate production capacity for Model Y (Model 3 would continue to be imported from China)
- During this time, Tesla withdrew its application for $1B Euro in funding to build a battery cell plant at Giga Berlin over non-sensical a priori requirements that the battery plant be "the 1st industrial instantiation of that technology". Which is it, Berlin? R&D or Volume? You can't have both; now you got neither (other battery production projects slated for Germany have also been cancelled). Red tape == Delays. Batteries used at Giga Berlin are imported from China (both LG 2170 cells and LFP battery packs)
- a 2nd GA line was planned, construction and tooling was largely completed by H2 2023 when Tesla decided to defer the project. This next part is speculation, but I think a combination of Labor policies, Union and lobbist activities, and market conditions (high inflation and a European conflict) lead to the decision to proceed prudently (bot there's more to come)
- It is still my hope that finished-but-unused space inside Giga Berlin Assembly Bldg 1 will be used to accelerate the Gen 3 production schedule (Tesla has applied for German permits for a 2nd Assembly Bldg, which is likely years away given the German approvals process)
Lesson 4: Go Big, or Go Home. Again.
3. Giga Texas: "
Tom Swift and his Triphibian Atomicar"
- Elon reads voraciously, has every since he was a boy. If you didn't grow up reading the Tom Swift books by Victor Appleton, then you will never understand why both the fictional Swift Industries campus in New Mexico and Giga Texas both sit on 4 sq miles of land...
- Model Y was always intended to be the 1st product built at Giga Texas, with a structural battery pack featuring 4680 cells, according to original plans
- Due to challenges in the supply chain (sourcing/permitting of battery materials), the decision was made to take an extra year to perfect 4680 cell production technology (starting with calendaring of the dry electrode slurry), and to synchronize the ramp of 4680 production with Cybertruck
- This meant that Texas Model Y would need to be produced w. Panasonic 2170 cells (Tesla already had ample experience) and/or with imported Korean 2170s or LFP battery packs. This story continues to evolve due to late announcements in U.S. IRA implementation (Treasury/IRS/KAOS)
Lesson 5: Max-Flex.
Overall, Tesla became enormously profitable during the pandemic and subsequent supply shortage. By late 2021,
TLSA Market Cap had soared to over $1T. Given this boost, Elon surpassed the Market Cap increments needed to earn all 12 tranches of his 2018 CEO Compensation plan (
as approved by TSLA Shareholders vote).
This rise also meant the accounts of even relatively-late TSLA investors were propelled to giddy new heights (gains from 20x to 35x even w/o using leverage). This
deeply offended Wall St hedge funds, as we would see later.
Conclusion: Model Y became the best selling car in the world by revenue in 2022, and by volume in 2023, besting the Toyota Corolla (on
Elon-time). Not only was Model Y a better car than its competitors, but it was a better
value than many cars half its price. After a teardown, Toyota Executives called it '
a work of art'. Thus, Model Y became the gold standard for EVs, and sold like ice cream on the Forth of July.
Next: Displacing the logistics juggernaut: Road-going (Class 8) diesel trucks
Tomorrow's Topic:
Day 05: Five golden rings | Semi Breaks Physiks