As demand grows, Tesla pushes to multiply its production



Tesla CEO Elon Musk has a vision for his factory: A Fremont auto plant buzzing with a high-speed choreography between parts and robots churning out 500,000 cars next year.

That’s nearly six times the current rate of production — the factory produced about 84,000 vehicles last year — but Musk says the company can meet its aggressive goals.

“Probably not a lot of people will believe us about this, but I’m absolutely confident that this can be accomplished,” Musk told shareholders last year, saying the modern automobile factory could be redesigned and become ten times more efficient. “We’re basically going to design a factory like you’d design an advanced computer.”

Skeptics question whether Tesla can meet its goals, but the company’s growth may hinge on the quick, mass production of its new, lower-cost sedan, the Model 3. Tesla received nearly 400,000 reservations in the weeks following the Model 3’s unveiling last year.

Musk said last week during the company’s earnings call that the Model 3 would begin production in July, ramping up to 5,000 per week by the end of the year. The company declined to say how many Model 3s in total would roll off the line this year.

Barclays analysts are predicting Tesla will not ship a Model 3 this year.

“Tesla is highly unlikely to announce a delay until it absolutely must,” analyst Brian Johnson wrote. “Thus we may need to wait until the summer to learn about a delay.”

Producing a half-million vehicles at the Fremont factory next year would make the plant among the most productive in the world. That’s more cars than Tesla has ever built. It’s more cars than the former NUMMI plant produced in its prime under Toyota and GM.

The company has an ambitious plan to build 4.6 million square feet of manufacturing and office space, essentially doubling the factory size.

Work is underway at the sprawling factory on Fremont Boulevard to reach its goal. A series of small projects worth about $5 million has begun, according to building permits filed with the city of Fremont.

Tesla submitted plans in January for a $2.8 million expansion of its north paint shop, according to public records posted on BuildZoom, a website tracking construction permits. In recent months, Tesla also has filed another 30 permits for $2 million more in improvements — including a range of repairs to heating and air conditioning units, water lines and stamping buildings. Tesla shut down production for a week this month to reconfigure the plant for the Model 3.

Fremont community development director Jeff Schwob said city staff meets with Tesla weekly, and it plans to meet more often as construction picks up later this year.

“It’s been a constant and fluid process,” he said, adding that he expects the next six months to be busy.

The company’s master strategy “could be anywhere from a 5- to 20-year plan, depending on how things go,” he said.

The company’s production goals would top peak output at the former NUMMI plant, which set a record with 428,632 vehicles produced in 2006, according to a history of the plant filed with permitting documents. Tesla took over the plant in 2010.

In Musk’s vision, Tesla will reinvent the way it makes cars and eventually become the world’s leading manufacturer. A Tesla spokesman declined to comment on specifics about the factory, but referred to previous public statements from company executives.

The company has reassigned engineers to redesign the plant layout and the manufacturing process, Musk said in last week’s earnings call. More robots are on the way.

Tesla has purchased Grohmann Engineering, a German company specializing in automating factory lines. Tesla envisions the engineering group as a key to new, highly automated production.

“You really can’t have people in the production line itself. Otherwise you’ll automatically drop to people speed,” Musk told investors last year. “There’s still a lot of people at the factory, but what they’re doing is maintaining the machines, upgrading them, dealing with anomalies. But in the production process itself there essentially would be no people.”

The company has also added capacity to build batteries and other parts at its new Gigafactory in Nevada.

Musk said Tesla learned painful lessons from mistakes made in the Model X production, which lagged more than a year behind schedule. Tesla’s other cars, the Model S and the Roadster, also missed production deadlines.

Some factors remain outside of Tesla’s control, including the reliability of parts suppliers. Many pieces of automobiles come from outside vendors, making specialized parts for the Model S, Model X, and now the Model 3.

T.R. O’Neill, senior analyst for Ascendient, said suppliers — providing everything from tires to brakes to computer components — need to cooperate for Tesla to meet its goals. Auto parts companies have been skeptical about Musk’s ambitious schedule.

O’Neill believes Tesla will produce a limited number of Model 3s this year.

Musk said the company has improved the quality of its suppliers, the result of launching three vehicles and building a small but passionate client base.

Rebecca Lindland, senior analyst at Kelley Blue Book, said Tesla could reinvent production for the automobile industry.

Much of modern automobile production is already automated, but Lindland said there are ways to squeeze more robots into the process. A vehicle with a simpler design and fewer parts can speed up production time, as well. Manufacturers analyze every step of the process to smooth out delays in the assembly line.

“I’m never going to say something’s impossible, especially with Elon Musk,” Lindland said, “but at the same time, it’s an unbelievably complex process.”



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