Tesla's new Lathrop, CA facility

[clmason]

My vote is they are going in house on supplier sourced bottled necked parts. Continuous vertical integration where the business needs it in order to make the supply chain more robust.

It could be many different kinds of parts... Battery Armor and Battery Casings also come to mind as well.

 

[austinEV]

My vote is they are going in house on supplier sourced bottled necked parts. Continuous vertical integration where the business needs it in order to make the supply chain more robust.

It could be many different kinds of parts... Battery Armor and Battery Casings also come to mind as well.

+100. it's totally the titanium armor plate thing.

So consider the challenge. You are responsible for making or buying 20k titanium alloy pieces, then a run rate matching the run rate of the cars thereafter. You need CNC machining, but the Fremont facility as (some, none, little) cnc capacity, but it is all being used for their regular output. You have made it your job to know about various mothballed factories in the area, possibly because (as I joked earlier) people keep calling you to offer them up. So you knew that there was a facility that used to do lots of CNC stuff, and you confirm that there is some older equipment in there, not cutting edge but fine for these shields. So you lease the facility, hire up some staff to make the "bubble" of parts required while possibly gearing up a much smaller capacity at fremont for the long term. So they need 30 machines for the short term and 3 machines long term. Rent 30 for a while and buy 3 in fremont. Build up the plates for the existing fleet and let the lathrop facility go, bringing over the new employees.

Not very exciting from an investor standpoint of course.

 

[ItsNotAboutTheMoney]

+100. it's totally the titanium armor plate thing.

So consider the challenge. You are responsible for making or buying 20k titanium alloy pieces, then a run rate matching the run rate of the cars thereafter. You need CNC machining, but the Fremont facility as (some, none, little) cnc capacity, but it is all being used for their regular output. You have made it your job to know about various mothballed factories in the area, possibly because (as I joked earlier) people keep calling you to offer them up. So you knew that there was a facility that used to do lots of CNC stuff, and you confirm that there is some older equipment in there, not cutting edge but fine for these shields. So you lease the facility, hire up some staff to make the "bubble" of parts required while possibly gearing up a much smaller capacity at fremont for the long term. So they need 30 machines for the short term and 3 machines long term. Rent 30 for a while and buy 3 in fremont. Build up the plates for the existing fleet and let the lathrop facility go, bringing over the new employees.

Not very exciting from an investor standpoint of course.

Imagine you're a notoriously optimistic, naturalized genius CEO of a car manufacturer who believes that within 5 years your company will be able to max out production in your single car plant. Imagine that somebody offers you a fantastic deal on a large factory 50 miles away from your car plant. The factory used to be a machining site for car parts and still has some old car-part-making machinery.
Do you
(a) lease it temporarily to cover a boost in parts manufacturing for a few retrofitted metal pieces
(b) lease or buy it as a permanent location, considering that
(i) the metal parts will be able to be packed and shipped relatively efficiently, so the extra unit transportation costs could be relatively low
(ii) by moving some machining away from your car plant you will increase floorspace and the maximum production capacity of your car plant
(iii) the history of the new factory means there could be a bunch of well-qualified machinists living nearby who'll be very happy to take a local job.
?

 

[EarlyAdopter]

+100. it's totally the titanium armor plate thing.

So consider the challenge. You are responsible for making or buying 20k titanium alloy pieces, then a run rate matching the run rate of the cars thereafter. You need CNC machining, but the Fremont facility as (some, none, little) cnc capacity, but it is all being used for their regular output. You have made it your job to know about various mothballed factories in the area, possibly because (as I joked earlier) people keep calling you to offer them up. So you knew that there was a facility that used to do lots of CNC stuff, and you confirm that there is some older equipment in there, not cutting edge but fine for these shields. So you lease the facility, hire up some staff to make the "bubble" of parts required while possibly gearing up a much smaller capacity at fremont for the long term. So they need 30 machines for the short term and 3 machines long term. Rent 30 for a while and buy 3 in fremont. Build up the plates for the existing fleet and let the lathrop facility go, bringing over the new employees.

Not very exciting from an investor standpoint of course.

Maybe, but they have a ton of excess capacity right now in Fremont on the stamping and cutting part of the line. When I toured they mentioned they only run the presses and cutters in the morning to make a whole day's worth of parts. No bottlenecks there.

 

[action7981]

CNC machining is different than cutting and stamping sheet metal. Each process envolves different machines / production lines. We need to think big picture like some others have pointed out. Model S volume is increasing, Model X is coming online in less than a year and Model E / GenIII is around 3 years out. My guess is Tesla is centralizing the parts they build and possibly taking more parts in-house in anticipation for the huge ramp we are going to see over the next 5-6 years. Going from 30,000 cars to 500,000 cars you are going to need a lot of capacity for building parts, especially if you make them in-house. Rather than use up space in Freemont that they will need for GenIII they got a great lease on a site nearby that can attract workers with lower hourly wages. As an investor this is the type of forward thinking activity I like to see.

 

[austinEV]

Imagine you're a notoriously optimistic, naturalized genius CEO of a car manufacturer who believes that within 5 years your company will be able to max out production in your single car plant. Imagine that somebody offers you a fantastic deal on a large factory 50 miles away from your car plant. The factory used to be a machining site for car parts and still has some old car-part-making machinery.
Do you
(a) lease it temporarily to cover a boost in parts manufacturing for a few retrofitted metal pieces
(b) lease or buy it as a permanent location, considering that
(i) the metal parts will be able to be packed and shipped relatively efficiently, so the extra unit transportation costs could be relatively low
(ii) by moving some machining away from your car plant you will increase floorspace and the maximum production capacity of your car plant
(iii) the history of the new factory means there could be a bunch of well-qualified machinists living nearby who'll be very happy to take a local job.
?

Yes, it might be a strategic increase for some reason. My only point is that SOMEDAY Tesla is going to do something that ends up being an ordinary boring event and not a signal of some new industry they plan on disrupting.

I HOPE it is an Iron Man suit manufacturing facility. I SUSPECT it is to make some boring part of a car that couldn't easily or cheaply be made in Fremont.

 

[anticitizen13.7]

CNC machining is different than cutting and stamping sheet metal. Each process envolves different machines / production lines. We need to think big picture like some others have pointed out. Model S volume is increasing, Model X is coming online in less than a year and Model E / GenIII is around 3 years out. My guess is Tesla is centralizing the parts they build and possibly taking more parts in-house in anticipation for the huge ramp we are going to see over the next 5-6 years. Going from 30,000 cars to 500,000 cars you are going to need a lot of capacity for building parts, especially if you make them in-house. Rather than use up space in Freemont that they will need for GenIII they got a great lease on a site nearby that can attract workers with lower hourly wages. As an investor this is the type of forward thinking activity I like to see.

I agree with this.

I am not a mechanical engineer or mill operator, but I have had the chance to work with a CNC machine before. The titanium plate and aluminum bars are unlikely to require CNC manufacturing. From what I understand, CNC manufacturing is best suited to applications where a precise and perhaps somewhat complicated 3D metal component is needed. Probably the most well-known examples of CNC produced parts are the aluminum iPhone 5/5S shells.

Tesla's engineers probably determined that the company could produce certain critical parts more reliably if they brought the manufacturing in-house.

 

[jjkroll]

I agree with this.

I am not a mechanical engineer or mill operator, but I have had the chance to work with a CNC machine before. The titanium plate and aluminum bars are unlikely to require CNC manufacturing. From what I understand, CNC manufacturing is best suited to applications where a precise and perhaps somewhat complicated 3D metal component is needed. Probably the most well-known examples of CNC produced parts are the aluminum iPhone 5/5S shells.

Tesla's engineers probably determined that the company could produce certain critical parts more reliably if they brought the manufacturing in-house.

I am a mechanical engineer with lots of CNC knowledge and I also agree. This is just freeing up Tesla Factory to be an assembly plant. They also need to expand and move all of the battery pack production machines to the gigafactory. This allows them to have a large, agile machining facility that keeps proprietary stuff in house. Less patent leaks that way. Exactly what he does at Spacex.

Also, notice that 3 of the engineer postings are for robotics/controls. That may be for parts handling, but it could also be for qualification and commissioning of charger hardware, battery pack assembly machines, etc.

 

[EarlyAdopter]

I am a mechanical engineer with lots of CNC knowledge and I also agree. This is just freeing up Tesla Factory to be an assembly plant. They also need to expand and move all of the battery pack production machines to the gigafactory. This allows them to have a large, agile machining facility that keeps proprietary stuff in house. Less patent leaks that way. Exactly what he does at Spacex.

One thing that won't be moving are the giant presses that stamp out body panels. At 5 stories tall, 3 above ground and 2 below, the only place they'll fit is the factory in Fremont. Those aren't going anywhere.

 

[Dollardragon]

I believe it is a lease.

 

[Dollardragon]

Lathrop Theory

This is interesting.

For I posted the following on Quora 4-30-14, after arriving at this "theory" before I read this post.

Job descriptions, patents, contracts, deeds, permits for construction and so on, provide concrete clues as to activities companies plan to engage in. Interviews, background pieces, bios and histories and such provide clues or outright statements as to philosophy and patterns of behavior. Combined they can paint a compelling picture.

I have noticed a strong DYI trend in Elon Musk. Then, I ran across an article that appeared in Fast Company, March 19, 2012, where Jon Gertner interviewed Gilbert Passin in which he flat out said, "We want to do everything ourselves." So without further ado, here is a copy of my Quora post:

​
The news about Tesla leasing a former automotive parts facility in Lathrop, California, with a climate controlled interior of 9.9 acres, comes with another bit of information that reveals what they will be up to there. That info is woven into job descriptions for the first wave of Tesla employees who will work there, as well as other sources.

Tesla is hiring people to program and operate some of the most sophisticated computer numerical control (CNC) milling machines that money can buy. These machines take a chunk of metal or any solid substance and using robotics and the right tooling, carve away at the piece until they produce the shape desired. The CNC machines can switch tool heads on the fly, thus go from carving to sanding to polishing to drilling or grinding and such with the drop of a hat. They will make bespoke parts or the same part by the thousands. Basically, there is not much they can't make, given the proper tooling attached and programming installed. At least that is my understanding, for I know little about them. I just know what I read.

I have asked myself why CNC and not 3D printing? I think its about speed of order turnaround. They really need to get the work out as evidenced by statements in the various job descriptions. For there is a palpable sense of urgency.

So, what are they going to make there?

Other manufacturing machines for one, possibly other CNC machines, various manufacturing robots and the like. The Lathrop facility will be able to make almost any tool Tesla needs for the manufacture of parts for their cars, like robots for Fremont to complete the lines and max production, to machines necessary for the Giggafactory to make batteries, or some of the parts of cars themselves like shock absorbers for the models S and X.

Tesla Lathrop is the big step forward to making Tesla the only soup to nuts, fully vertically integrated automobile manufacturer in the world. Once they fill Lathrop and get it running efficiently, they will have one hell of a tight running, cost effective manufacturing operation. All the bloat cost of the middle man will be removed and they will have absolute control over their inventory and its timing, taking "just in time" to a whole new level.

So the Giggafactory will come custom equipped at a fraction of the cost. Thus they have the perfect tools for the job, but also control the information about HOW the NEW batteries will made, as much will be trade secret versus patent. Therefore, making it extremely difficult to reverse engineer the manufacturing process as their sources for information will be nil.

At Tesla the development of the new battery chemistry is a constant ongoing process that seems to be a mix of tweaking, discovery and evolution that keeps moving forward. [See annual report, foot note (1A)] Prototypes are built by a dedicated crew on an ongoing basis.

The new batteries will charge faster and be more energy dense as stated in, My Conversation With JB Straubel at Hawthorne Battery Swap, by SamO,June 20, 2013, Tesla Forums, 2.JB, "Some patents don't end up in the working product. However, the tesla cell chemistry is improving and a 4-500 mile pack is not that far away. "Further, not all the jobs are posted on the Tesla website. There are also positions posted on the SpaceX pages. As Elon Musk has absolute dominion over SpaceX, he has been known to "loan" talent to Tesla.Given some of the recent job descriptions at SpaceX this could well be the case. Two positions stand out: "Build Engineer, Batteries" and "Battery Engineer, Mechanical Design". Additionally, there was also a similar position posted months ago by Tesla, that I now cannot find, that was like these.
How do I know they are going 100% vertical? Because they said they would.In an article that appeared in Fast Company, March 19, 2012, Jon Gertner interviewed Gilbert Passin, Tesla's VP of manufacturing:"You have to understand," Passin says, "with a fraction of the cost of what others would spend, and a fraction of the time, and a fraction of the resources, we are trying to do something really kick-ass."... Building a different kind of car technology means you can build it in a different way, and possibly much more efficiently...

…Thus Tesla is designing a physical product and producing it in a vertically controlled manner…

...Tesla is trying to avoid using outside suppliers for parts whenever possible. The company, moreover, has the highly unusual intention to make its own dies to stamp sheet metal to its own specifications. "If you master that," he tells me, "you master the know-how that goes along with it." As he puts it, "We want to do everything ourselves." (my emphasis) Furthermore, they will be making a lot more than "dies to stamp sheet metal".

Consequently, nine point nine acres of indoor climate controlled space will have something big going on inside. Given the current job descriptions, they will be making production machinery.

"… CNC Programming for CNC mills in the production of production components to enhance, optimize and support the production process…" Careers details | DFJ Venture

Bespoke manufacturing equipment is what Lathrop's main purpose is.From Robotics and Controls Engineer job description,

"… Responsibilities:
Fabricate, assemble, install, and repair pumps, shafts, bearings, etc.
Support equipment construction and process development (emphasis mine)Installation and Sustaining Engineering for large scale CNC machining
Perform process improvement and optimization under dynamic conditions…"
"Degree and/or 2+ years of equivalent experience with mill, lathe, band saw, TIG/MIG welding
Manufacturing equipment installation and process flow understanding including safety requirements(emphasis mine)Self-driven problem solver, capable of working with limited direction
Experience with electrical/hydraulic/pneumatic systems (emphasis mine)Strong organization and documentation skills preferred
Experience with CNC (DMG-Mori, Mazak, Matsuura, Haas, Emmegi)..."


This also serves to help answer the question as to how they will bring the Gen 3 Car to the public below $40,000.

As time goes on, Tesla just gets more interesting.

If possible, I am much more impressed with Musk given this. For he is a master chess player in the arena of business. Thus, I believe that to properly understand where Tesla is going and how they will get there, one must understand Elon Musk. Consequently, in one of my next installments I will cover The Mind of Musk, Cliff Notesas related to Tesla and SpaceX. It will serve to reinforce this piece, plus some.Also, in the future, I will cover Tesla's possible Achilles' Heel.

Finally, I welcome all bearers of valid information that can correct any misinterpretation on my part. We all just want to know where Tesla is going and how and when they will get there, right?

I look forward to enlightenment and remember, you saw it here first.

Here is another recent post about the facility:
Is Tesla building a new skunkworks facility in Lathrop, California?

Footnote:
(1A) We believe one of our core competencies is the design of our complete battery pack system. We have designed our battery pack system to permit flexibility with respect to battery cell chemistry, form factor and vendor that we adopt for battery cell supply. In so doing, we believe that we can leverage the substantial battery cell investments and advancements being made globally by battery cell manufacturers to continue to improve the cost per kilowatt-hour of our battery pack. We maintain an internal battery cell testing lab and an extensive performance database of the many available lithium-ion cell vendors and chemistry types. We intend to incorporate the battery cells that provide the best value and performance possible into our battery packs, and we expect this to continue over time as battery cells continue to improve in energy storage capacity, longevity, power delivery and cost. We believe this flexibility will enable us to continue to evaluate new battery cells as they become commercially viable, and thereby optimize battery pack system performance and cost for our current and future vehicles. We believe our ability to change battery cell chemistries and vendors while retaining our existing investments in software, electronics, testing and vehicle packaging, will enable us to quickly deploy various battery cells into our products and leverage the latest advancements in battery cell technology. Tesla Motors Annual Report Form 10-K Filed Feb 26, 2014

 

[Chickenlittle]

This is interesting.

For I posted the following on Quora 4-30-14, after arriving at this "theory" before I read this post.

<snip>

this fits better than other theories.

 

[DaveT]

For I posted the following on Quora 4-30-14, after arriving at this "theory" before I read this post.

Dollardragon - thanks for the post.

So, basically you're saying that you think Tesla is going to use Lathrop to build machines that build parts, is that correct?

If that's so, then should we see a bunch of job posting for engineers and such that know how to make/design those kind of machines?

 

[Auzie]

Dollardragon - thanks for the post.

So, basically you're saying that you think Tesla is going to use Lathrop to build machines that build parts, is that correct?

If that's so, then should we see a bunch of job posting for engineers and such that know how to make/design those kind of machines?

I have seen job ads for engineers.

Tesla could be replicating some of their existing machines for new lines. Replicating something is easier than starting from the scratch.

 

[Robert.Boston]

There's too my IP in each of these robotic machine tools for Tesla to be going in that direction, IMO. Bringing die manufacturer in-house makes a lot of sense, as would making more of the value-added castings. The more content they can localize, the more Tesla gains control over margins and production rates. Remember when the Model S was being held up because of slow deliveries of dies?

 

[kenliles]

There's too my IP in each of these robotic machine tools for Tesla to be going in that direction, IMO. Bringing die manufacturer in-house makes a lot of sense, as would making more of the value-added castings. The more content they can localize, the more Tesla gains control over margins and production rates. Remember when the Model S was being held up because of slow deliveries of dies?

agree- It's a very interesting theory and well presented; but the other aspect is quantity of tools is far too low to warrant full time facility like that. It might be part of the mix though - fixtures etc. that don't carry the patents of actual tool-age.

 

[VolkerP]

I liked the stamping dies theory at first. But now I think, dies are absolutely critical to vehicle development and production. Elon is a big fan of having design, tooling, and production under one roof so there is direct & quick feedback.

So I figure Lathrop is about tooling and manufacturing much less exciting metal parts that are not subject to high impact design changes. And that can be produced and stocked in large numbers, then shipped to Fremont for assembly. like e.g. battery casing or charger casing or inverter/motor/gear box housing.

 

[matbl]

So I figure Lathrop is about tooling and manufacturing much less exciting metal parts that are not subject to high impact design changes. And that can be produced and stocked in large numbers, then shipped to Fremont for assembly. like e.g. battery casing or charger casing or inverter/motor/gear box housing.

Yes. That's my guess as well.

 

[hcsharp]

I'm not sure everyone fully realizes the scope of Tesla's short-term goals. Do you all realize the shear size of the Giga Factory? The building alone will be 200 acres. In addition to the GF, they need to expand the production line in Fremont by about 500% or more in about 3-4 years! That's not much time for such a massive undertaking. The amount of custom parts they will need just for this massive ramping up, no, Giga-ramping up of battery and car production is mind boggling.

Sure there's a lot of IP in production machinery but there's also a lot of little parts and tools for those robot arms that have to be made regardless of who you buy the basic robot from. And if making parts for machines that make parts isn't enough, look at all the "small parts" as DaveT calls them that Tesla needs to make or be prepared to make when a supplier fails to deliver. Are you going to risk having thousands of workers standing around when you need to start production and there's a glitch with some stupid part that you can easily make in your own CNC shop? While the new facility sounds large at the moment, it's not when you look at what Tesla has in the works for the next few years.

- - - Updated - - -

As to the question why isn't Tesla using the excess space in the Fremont facility, they will fill that space fairly soon with auto assembly lines and I suspect it's cheaper to renovate the CNC shop somewhere nearby than to move it later. They probably got that new space for a song whether they leased it or purchased. In addition to facility cost, it's always nice to get started in a neighborhood with slightly higher unemployment and lower housing costs (at least by CA standards LOL).

 

[kenliles]

I'm not sure everyone fully realizes the scope of Tesla's short-term goals. Do you all realize the shear size of the Giga Factory? The building alone will be 200 acres. In addition to the GF, they need to expand the production line in Fremont by about 500% or more in about 3-4 years! That's not much time for such a massive undertaking. The amount of custom parts they will need just for this massive ramping up, no, Giga-ramping up of battery and car production is mind boggling.

Sure there's a lot of IP in production machinery but there's also a lot of little parts and tools for those robot arms that have to be made regardless of who you buy the basic robot from. And if making parts for machines that make parts isn't enough, look at all the "small parts" as DaveT calls them that Tesla needs to make or be prepared to make when a supplier fails to deliver. Are you going to risk having thousands of workers standing around when you need to start production and there's a glitch with some stupid part that you can easily make in your own CNC shop? While the new facility sounds large at the moment, it's not when you look at what Tesla has in the works for the next few years.

- - - Updated - - -

As to the question why isn't Tesla using the excess space in the Fremont facility, they will fill that space fairly soon with auto assembly lines and I suspect it's cheaper to renovate the CNC shop somewhere nearby than to move it later. They probably got that new space for a song whether they leased it or purchased. In addition to facility cost, it's always nice to get started in a neighborhood with slightly higher unemployment and lower housing costs (at least by CA standards LOL).

This is an excellent point hcsharp. I agree the general calculation of the GF (and Manufacturing) scaling impact is under estimated and under analyzed. I think this relates to Elon's ability to project his vision beyond the comprehension of even his pears- forget about Wall Street. Couldn't agree more with your perceptive post