Tesla Motors: Accelerating plans for production of 500,000 vehicles to 2018

Production at Gigafactory ahead of schedule, Panasonic to produce battery cells

2016/10/24

Overview

Model
3
The Model 3, which has received slightly fewer than 400,000 reservations (Photo: Tesla Motors)

  In fall 2015 Tesla Motors released the SUV Model X, a variant of the Model S, and introduced the Autopilot highway semi-autonomous driving system on both models.

  The company is expanding with unprecedented initiative. In 2015 it sold 50,595 vehicles globally, and plans to sell 80 to 90 thousand vehicles in 2016. Previously, the automaker had planned to sell 500 thousand vehicles in 2020. However, after 325 thousand reservations were received for the Model 3, which is scheduled to start production in the second half of 2017 at a base vehicle price of USD 35 thousand, the OEM decided to push its goal up by two years to 2018. Tesla will double the production capacity at its Fremont plant in California and accelerate its manufacturing plans for its Gigafactory, a massive battery plant, by two years. In September 2016, Panasonic, which is in charge of manufacturing battery cells, procured JPY 400 billion in bonds, and will use a large portion of the money to build facilities at the Gigafactory as well as for production.

  Following the announcement of Q1 financial statements in May 2016, CEO Elon Musk announced that the OEM will accelerate its plans to achieve the production of one million vehicles in 2020 (a total of 100 to 150 thousand Model S and Model X vehicles, with the rest being Model 3).

  There are many who voice concerns as to whether these plans for rapid growth can be achieved as they have been drawn up due to Tesla's lack of experience in mass production, and the massive investments that are needed from the OEM and its suppliers.


Related Reports:
Tesla Motors' vision to sell 500,000 units in 2020 (Feb. 2014)



Announcement of the Master Plan, Part Deux, planning to release EVs in all major segments

  In July 2016, Tesla Motors announced its Master Plan, Part Deux. The automaker has announced it will enter electric vehicles (EVs) in all major vehicle segments, advance autonomous driving, and establish a system utilizing car sharing wherein Tesla vehicles will generate revenue when the owners are not using them.

  This plan is a follow-up to Tesla's Master Plan 1 that was announced in 2006. Over the course of Master Plan 1, the OEM began by entering into the field of power generation systems, moved on to develop a "premium, low-volume production car (Roadster)" and "a moderately low price mid-size vehicle (Model S)," and the company is now aiming to release an "affordable mass-produced car (Model 3)," to fully achieve the goals it announced ten years ago.

Tesla Motors' Master Plan, Part Deux

  Establish a system integrating solar power and electrical power storage (the OEM will purchase SolarCity as part of this plan).
  Expand its EV lineup to enter all major segments (the OEM will develop the Model 3, an SUV based on the Model 3 (Model Y), a new type of pickup truck, as well as a heavy-duty truck and a small bus capable of carrying a large number of passengers). The OEM has no plans to develop an EV with a price lower than the Model 3.
  Develop an automated driving system that is many times safer than human driving.
  Establish a car sharing system wherein Tesla vehicles generate revenue when they are not in use (Tesla owners only use the cars 5% to 10% of each day. When Tesla vehicles generate revenue, the actual financial burden of purchasing and owning a vehicle is dramatically reduced). Automated driving will prove to be massively effective for car sharing as well.

Source: Tesla Motors' press release on July 20th 2016

Tesla Motors' Master Plan Part 1

  Develop a premium EV sports car, and produce it in low volumes.
  With the returns from the EV sports car, develop and produce a less expensive, mid-sized EV.
  With the returns from the mid-sized EV, develop and mass-produce an affordable EV.
  Enter the solar power system field.

Source: Tesla Motors (2006)
(Note) CEO Elon Musk has stated that for Tesla Motors, which started from zero, the plan laid out above was the only imaginable path to success. He added that by showing the world a full-fledged EV even in limited quantities, the OEM has been able to advance to the next stage (statement at the announcement of the Model 3 on March 31 2016).

Acquisition of the solar panel system company SolarCity

  In August 2016, Tesla agreed to acquire the solar panel manufacturer SolarCity. Tesla will make the purchase by through a stock swap (aggregate market value USD 2.8 billion). This will make the automaker the world's first vertically integrated energy company, allowing it to supply an efficient system for the creation, storage, and consumption of electricity for domestic, industrial, and smart city use in addition to EVs.
  Since 2015, Tesla Motors has sold the Powerwall, a stationary storage battery for domestic use, and the Powerpack, an industrial stationary storage battery. In Q4 2015, production was moved to the Gigafactory. These products have already been delivered to customers in the U.S., Germany, and Australia. The Powerwall is also being used for Tesla's Destination Charger.

Source: Tesla Motors' press release on August 1st 2016



Plans for launching new models, production, and sales: 500,000 vehicles to be produced in 2018

  At the end of 2015, 107 thousand Tesla vehicles were being driven in 42 countries around the world, and Autopilot is accumulating data as it is used by drivers traveling 1 million miles a day.

  In fall 2015 the automaker released the Model X SUV, a variant of the Model S. Both the Model S and Model X feature Autopilot semi-autonomous driving technology, which can be used on highways. Following this, reservations began at the end of March 2016 for the Model 3, which has a base vehicle price of USD 35 thousand, and roughly 325 thousand vehicles were reserved in a single week. Production will begin on July 1 2017, and the vehicle will be released in the same year.

  With the addition of the volume production Model 3, Tesla Motors announced it would accelerate its plans to produce 500 thousand vehicles (total for all model types) from 2020 to 2018, in addition to bringing its production plans for the Gigafactory forward by two years.

  Other new models will be released in the following three to four years, and the OEM plans to release a Model Y SUV that will be based on the Model 3, as well as a second generation Roadster.

  In order to support increased demand for its products, Tesla Motors will enhance its production facilities by doubling the capacity at its Fremont plant in California, expand its sales network from 215 locations as of March 2015 to 441 locations by the end of 2017; increase the number of Supercharger rapid chargers that are capable of charging at 120kW; from 3,608 locations to 7,200 locations; and increase the number of Destination Chargers from 3,689 (installed at places where users stay for extended periods of time, such as hotels) to 15 thousand.

The
SUV Model X, based on the Model S The
Model X with its rear falcon wing doors open The
Model X from the rear at an angle
The SUV Model X, based on the Model S
(Photo: Tesla Motors)
The Model X with its rear falcon wing doors open
(photographed at CEATEC Japan 2016)
The Model X from the rear at an angle
(photographed at CEATEC Japan 2016)
The
cockpit of the pre-production Model 3 The
Fremont plant in California Charging with Superchargers
The cockpit of the pre-production Model 3
(Photo: Tesla Motors)
The Fremont plant in California, which produces the Model S, Model X, and is scheduled to eventually produce the Model 3
(Photo: Tesla Motors)
Charging with Superchargers
(Photo: Tesla Motors)

Tesla Motors' model plans

Model name Release period Overview
Model S 2012   The Model S has a lithium-ion battery (LiB) with a capacity of 60 kWh, 75 kWh, 90 kWh, or 100 kWh (see chart below) in the newest version. The car has a length of 4,978 mm, width of 1,950 mm, and height of 1,435 mm. In 2014, a two-motor AWD model was released. The price ranges from USD 67,200 to 135,700.
Model X Autumn 2015   The Model X is an SUV model based off the Model S that features rear falcon wing doors. It has a LiB with a capacity of 60 kWh, 75 kWh, 90 kWh, or 100kWh (see chart below) in the latest version. The car is a seven-seat vehicle, features AWD as a standard feature, and has drive motors in the front and rear. Prices range from USD 75,200 to 136,700.
Model 3
(Note 2)
End of 2017   The Model 3 is the "affordable" model previously promised by Tesla. The base vehicle price is expected to be roughly USD 35 thousand (before incentives are applied). The base vehicle is expected to be a single-motor FR vehicle, and a two-motor AWD version will also be available. The Model 3 will have a driving range of 215 miles (roughly 350 km). Autopilot will come as a standard feature.
  Reservations for the Model 3 began on March 31 2016, and in just one week 325 thousand vehicles were ordered. However, there was a refundable reservation deposit of USD 1,000.
  Production of the Model 3 will begin in the second half of 2017, and in 2018 the OEM will produce 500 thousand vehicles with a focus on the Model 3. However, many analysts predict that even though production will begin in the latter half of 2017, full-fledged volume production will only begin in 2019.
Model Y 2019-2020   The Model Y will be a crossover vehicle based on the Model 3. The base vehicle price will likely be somewhere from USD 40 thousand to 45 thousand. AWD will come as a standard feature, and the vehicle will have a minimum driving range of 215 miles (roughly 350 km). CEO Elon Musk anticipates annual sales of 500 thousand to 1 million vehicles.
Roadster Around 2019   The second generation Roadster, unlike the original version that was based off a Lotus vehicle, will be developed with a common platform with the Model 3 and Model Y, and will aim for acceleration of 0-60 mph in 2.8 seconds.
Model S Around 2020   A full model change of the Model S is expected.
Other models 2020-   Tesla Motors will develop a pickup truck, a heavy-duty truck, and a small bus capable of carrying a large number of passengers.
Source: Automotive News on September 12th 2016/April 11th 2016
(Note) 1. In 2015, Tesla Motors sold 25,202 Model S vehicles in the U.S., topping the American large-size premium four-door sedan market (second place was the Mercedes-Benz S-Class at 21,934 vehicles). From January to August 2016, the Model S has maintained its position with 14,489 vehicles sold (The second place S-Class sold 11,974 vehicles).
2. The pre-production Model 3 has an extremely simple interior design, with only a steering wheel and a touchscreen that is15 inches wide (roughly 38 cm), and no instrument panel (see the above photo (bottom left)). CEO Elon Musk commented that the design will "feel like a spaceship," and specific details and functions will be revealed sequentially. The media and Tesla enthusiasts speculate that the "Tesla Model 3 will feature a more advanced version of Autopilot than the current version featured on the Model S/X," and that "in addition to Autopilot status, vehicle speeds and other data will be shown on a heads-up display."


  In August 2016, Tesla Motors released versions of the Model S and Model X featuring LiBs with a capacity of 100kWh, named the Model S P100D and Model X P100D, respectively. The Model S P100D has a driving range of 315 miles, making it the first EV that has realized a driving range exceeding 300 miles. Additionally, the vehicle has realized the world's third fastest 0-60 of 2.5 seconds. Although Ferrari's LaFerrari and Porsche's 918 Spider have quicker acceleration speeds, both are two-seat sports cars, priced at over USD one million, and are currently unavailable for purchase as new vehicles, being that they are limited-production vehicles. The Model S can seat five adults and two children.

Model S and Model X models equipped with 100 kWh batteries (with Ludicrous mode)

Battery Capacity Driving range 0-60 miles
Acceleration
EPA cycle NEDC cycle
Model S P100D 100kWh 315 miles 613km 2.5 seconds
Model X P100D 289 miles 542km 2.9 seconds

Source: Tesla Motors' press release on August 23rd 2016
(Note) 1. The optional "Ludicrous mode" does not feature an increase in battery capacity, but enhances performance through electronics. Normally, the vehicle has been designed to cut the fuses when a current of 1,300 or more amperes flows, but the performance has been increased to allow for 1,500 amperes while ensuring safety.
2. The Model S P100D is priced at USD 134,500.



Tesla Motors: Construction of the "Gigafactory" large battery plant, Panasonic responsible for production of cells

  Tesla Motors is currently constructing the Gigafactory battery plant in Nevada. The plant will provide 500 thousand vehicles worth of lithium-ion batteries. To support its decision to speed up its plans to expand production from 2020 to 2018, Tesla Motors has also moved ahead its production plans for the Gigafactory by two years.

  Panasonic, which supplies lithium-ion batteries, issued bonds of JPY 400 billion in September 2016 to procure the funds necessary to support Tesla plan. If successful, Tesla will bring a massive change to the automobile industry, and Panasonic believes this collaboration will result in a prime opportunity for growth for it as well.

Tesla
Motors' Gigafactory Tesla Motors' Gigafactory
Tesla Motors' Gigafactory, currently under construction in Nevada (the left image is a conceptual image, the right image is the construction status), where Panasonic will be in charge of producing cells (Photo: Tesla)

Tesla Motors: Constructing the Gigafactory

  Tesla Motors is constructing the massive Gigafactory LiB plant in Nevada. Combined with its partner, the OEM will invest a total of USD 5 billion (Tesla alone will invest USD 2 billion) in the project, and the plant will supply 500 thousand vehicles worth of lithium-ion batteries for EVs annually (the plant will produce a total capacity of 35 GWh, topping the total capacity of batteries produced globally in 2013).
  Power will be supplied via the standard power grid as well as through solar panels and wind-power generation. Construction began in June 2014, and the plant will begin producing LiBs in 2017. The plant will have two floors, and Panasonic will send the cells it produces to the Tesla floor, where the automaker will handle the finishing processes to make battery packs. The plant will have an area equal to 280 Tokyo Domes.

Source: Tesla Motors

Panasonic: Procurement of JPY 400 billion to support Tesla's increased production

  Panasonic has supplied Tesla Motors with LiBs since 2007. The company has partnered with Tesla to construct the large-scale Gigafactory battery plant, and established the Panasonic Energy Corporation of North America in October 2014 to produce LiBs there. Initially, Panasonic announced that it would invest USD 1.6 billion for the construction of Gigafactory.
  Panasonic will support Tesla's plan to speed up its production for the Model S, as well as for batteries at the Gigafactory. In September 2016, the company issued JPY 400 billion in bonds, with the majority being invested in Tesla's Gigafactory. Panasonic will expand its LiB business from its vehicle-mounted battery and electrical storage businesses from a valuation of JPY 180 billion and 20 billion (respectively, as of FY 2015) to JPY 400 billion and 100 billion in FY 2018.
  Panasonic has supplied Tesla with a cylindrical battery it referred to as the "18650," which had a diameter of 18 mm and height of 65 mm, but has newly developed the "21700." In addition to an increase in the battery's volume, Panasonic has refined the nickel-based positive electrode materials to increase battery capacity, thereby increasing the energy density. Roughly 7,000 batteries have been supplied for every Model S, but the company expects to be able to decrease these figures to a range of 4,000 to 5,000 for every Model 3.

Sources: Panasonic press releases from October 3 2014, July 15 and September 1 2016, and the November 13 2015 Nikkan Kogyo Shimbun.



Handling of Autopilot accidents: Strengthening measures to disable no-handed driving

  In the fall of 2015, Tesla Motors equipped the Model S and Model X with the Autopilot highway semi-autonomous driving system.

Introduction of the Autopilot highway semi-autonomous driving system

  Autopilot is equipped with a camera, millimeter-wave radar, ultrasonic sensors, and GPS. It handles automated driving within lanes on highways as well as lane changes, and automatically controls driving speed with traffic-aware cruise control. Autopilot also has automated parking features controllable by drivers from outside their vehicles on a smartphone.
  Tesla Motors has equipped cameras, radars, ultrasonic sensors and GPS required for Autopilot in Model S vehicles shipped since October 2014. In October 2015, the OEM distributed the version 7.0 software over-the-air to enable Autopilot systems.
  The reason Tesla decided to not wait for the completion of its automated driving technology and implemented the Autopilot semi-autonomous driving system is because the OEM believes the current system to already be safer than human driving. According to the NHTSA, the personal injury rate in the U.S. is one injury per 89 million miles driven. Vehicles featuring Autopilot have driven double that distance, and Autopilot's performance is improving daily.

Sources: Tesla Motors press release on October 14th 2015, Automotive News published on July 11th 2016


  In May 2016, a fatal accident occurred while a Model S was being driven on Autopilot. Being the first fatal accident using automated driving, the incident has gained considerable attention, with much criticism leveled against calling technology where driving responsibility is still placed on the driver "autonomous driving."

  Autopilot requires drivers to constantly have their hands on the steering wheel, and this requirement is described in the instruction manual. Drivers who violate this are also warned. However, the Autopilot system continues to function even when drivers ignore the warning and keeps driving autonomously. Tesla Motors has collected data from many vehicles equipped with Autopilot to improve its autonomous driving functions, and has placed a high priority on continuing this pursuit.

  In September 2016, Tesla distributed the version 8.0 software via over-the-air software update to Model S and Model X vehicles featuring Autopilot (at the time of its release, the software for Autopilot was version 7.0). The system utilizes radar more than the previous software did, which increased the precision of autonomous driving, has been increased, and a function has been added so that when drivers remove their hands from the steering wheel, a chime alerts them. If this warning is continuously ignored, Autopilot functions are disabled.



Pessimism over the Model 3 sales target

  According to the August 8 2016 of Automotive News, Tesla will begin production of the Model 3 on July 1 2017, but is facing large hurdles in meeting its goals of producing 500 thousand vehicles in 2018.

  Tesla is currently moving forward with plans to strengthen its existing plant as well as the construction of the Gigafactory, which will supply batteries for the Model 3. The OEM is expected to make a capital investment of USD 2.25 billion in 2016. In Q2 2016, Tesla procured funds of USD 1.7 billion, and at the end of the quarter, it announced it possesses USD 3.25 billion in cash. However, many analysts predict that the OEM will not be able to cover its costs. There is much attention on whether or not investors and related parties can continue to patiently support the automaker, which suffered massive losses for 13 consecutive quarters through Q2 2016.

  Another point of focus is how far Tesla's development and production departments, as well as its external suppliers, can proceed according to plan. Hypothetically, if the plans are largely delayed, there will be massive skepticism about an "affordable Tesla."

  CEO Elon Musk has announced the OEM will stick to its planned production start date of July 1 2017 for the Model 3, even if it requires removing or replacing external suppliers or internal resources.

Tesla Motors' Results

(thousand dollars)

2014 2015 First half
2015
First half
2016
Revenues 3,198,356 4,046,024 1,894,856 2,417,065
Gross profit 881,671 923,503 473,443 527,244
Loss from operation (186,689) (716,629) (272,634) (486,264)
Net loss (294,040) (888,625) (338,408) (575,455)
Research & development (464,700) (717,900) (348,866) (374,146)
Capital Investment (969,885) (1,634,850) (831,225) (511,579)
Source: Tesla Motors


Sales forecast by LMC Automotive: Tesla Motors' sales in 2019 to hit 210,000 units

(LMC Automotive, Quarter 3 2016)

Tesla Motors' sales forecast

  LMC Automotive's assessment of Tesla's volume projections is significantly more conservative than those of the manufacturer. Tesla has demonstrated, with the Model S, that it can produce a ground-breaking Premium electric vehicle which, on many measures, has been a huge success. But it is altogether a different proposition to move into mass-market territory with the upcoming Model 3, something on which the high volumes that Tesla proposes rely heavily. As things stand, the Tesla's Gigafactory will struggle to meet the targeted volumes. Suppliers would need to be willing to invest to expand capacity in order to meet these targets, which could be seen as a high-risk venture for them. In addition, the immense complexity of high-volume vehicle production is something in which Tesla has yet to demonstrate a track record.

  And the Model 3 is to be pitched as a Premium sedan at volume levels which exceed established Premium vehicles in that segment in many markets, not least the US, a segment which is, furthermore, under threat from the expansion of SUV body style vehicles. Tesla may have received 400,000 pre-orders for this vehicle, but the payments on orders placed are fully refundable with no cancellation penalty: the 400k units are by no means guaranteed. When these challenges are taken together, LMC Automotive feels that a conservative volume forecast is a more plausible position to adopt.

  According to LMC Automotive's sales forecast (Quarter 3 2016), Tesla Motors' global sales in 2019 will be 210 thousand units, 4.4 times as many as 2015.

  US Sales are projected to grow well above the market rate in 2016 as the Model X begins a full year of sales. Sales of the Model S are projected to fall 22%, as the Tesla Model X draws from would-be Model S buyers. Following a slow initial launch due to issues in the supply chain, deliveries of the Model X have begun to reach a normalized rate in line with production. As a result, projected 2016 sales for Tesla are expected to increase nearly 33% over 2015.

  Tesla is projected to increase market share significantly over the forecast horizon. This is due entirely to its product line-up increasing to six vehicles by 2021. The recently-launched Model X SUV gives Tesla another higher-end model in a segment that is very popular with customers at present. Tesla is expected to launch the Model 3 Compact Premium sedan in 2017 and has already received significant attention, with global preorders totaling just fewer than 400,000. Tesla is also projected to follow the Model 3 with an SUV variant in 2018, which will help add incremental volume. Additionally, Tesla is expected to return to its roots and introduce an all-new Roadster in 2019.

  As for Tesla's by country sales ratio, the U.S. is its largest market, accounting for more than 50% of the company's sales. While the U.S. sales ratio has been gradually decreasing as the number of Teslas sold in Europe and China increase, it will remain a little over 50% at 51.6%, in 2019. European countries such as Germany, Norway, and China will follow the US, with respective sales that exceed 10,000 units in 2019.

Tesla Motors' sales in 2019 to hit 210 thousand units (LMC Automotive)

2013 2014 2015 2016 2017 2018 2019
Total 22,529 28,066 48,055 59,747 85,040 145,020 209,813
USA 17,903 15,262 25,616 34,051 50,716 80,005 108,278
Germany 215 817 1,582 1,975 2,721 10,766 18,497
Norway 1,977 3,990 3,984 4,543 8,433 12,659 18,293
China 0 2,499 3,692 6,368 6,630 10,051 13,109
Netherlands 1,186 1,510 1,912 2,620 4,444 6,316 9,870
France 38 328 708 732 850 4,803 9,587
UK 0 717 1,468 2,721 2,765 4,429 6,878
Canada 639 786 2,021 2,119 2,435 3,504 4,640
Belgium 148 521 820 868 1,188 2,227 3,822
Switzerland 215 494 1,548 1,711 1,989 2,531 3,302
Austria 50 136 492 704 825 1,486 2,367
Spain 1 15 10 49 172 977 2,063
Italy 21 55 134 193 267 898 1,744
Sweden 5 267 996 608 515 1,096 1,724
Korea 0 0 0 0 427 1,124 1,485
Denmark 112 460 2,736 171 229 606 1,122
Portugal 0 0 0 9 42 410 860
Finland 2 95 146 111 150 422 706
Ireland 0 3 2 10 36 244 594
Greece 0 0 0 7 20 190 419
Luxembourg 5 35 33 45 56 139 274
Ukraine 0 8 23 32 32 37 48
Czech Republic 7 20 57 37 34 33 44
Estonia 1 19 6 12 20 20 29
Slovenia 3 13 8 12 17 18 26
Poland 0 8 21 12 12 12 12
New Zealand 0 0 22 12 12 12 12
Latvia 1 3 7 2 3 5 8
Lithuania 0 1 4 4 0 0 0
Hungary 0 4 7 8 0 0 0
Singapore 0 0 0 1 0 0 0
Source: LMC Automotive "Global Automotive Sales Forecast (Quarter 3 2016)"
(Note)1.  Data indicates figures of only small-size vehicle, including passenger cars and light commercial vehicles with gross vehicle weight of under 6 ton.
2.  All rights reserved. Reproduction of any data will require permission of LMC Automotive.
3.  For more information or inquiries of forecast data, please contact LMC Automotive.


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Keyword:

Autopilot, Gigafactory, Fremont plant

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