January 31st, 2019 by Kyle Field
On its Q4 2018 earnings call last night, Tesla confirmed that the Model Y will be the first vehicle it will build at its Gigafactory 1 in Sparks, Nevada. In parallel, it plans to build the crossover (CUV) at its new Gigafactory 3 in Shanghai, China. The latter was shared previously and the former was long suspected. We actually got intel recently that the Model Y would be built at Gigafactory 1, but for some reason decided to not break the news. We do have other exclusive info coming about Gigafactory 1, though.
The Model Y is expected to be received warmly and will have more demand than any of Tesla’s other vehicles, since customers across the world continue to move away from cars to crossovers. Tesla plans to build the Model Y off of the Model 3 platform, with the two sharing 76% of the same parts, according to Tesla CEO Elon Musk. This shared DNA between Model 3 and Model Y will allow Tesla to leverage even greater economies of scale in its supply chain and demand even lower prices from its suppliers, in addition to improving its downstream efficiencies with the supply of parts to its service centers and approved body shops.
Parts sharing was the premise for the design of Tesla’s full-sized Model S and Model X, but that promise did not play out as planned. Instead, Tesla pushed to include an ever-increasing list of new features in the Model X as it evolved into the “faberge egg” of cars, according to CEO Elon Musk. When all was said and done, the two vehicles only ended up sharing about 30% common parts. Elon shared on the Q4 2018 earnings call that the Model X is a work of art and that nothing like it will probably ever be made again.
The production design of the Model Y has been completed and parts orders are already going out to suppliers in advance of the official unveiling of the vehicle, which could be as early as March, if vague tweets from Elon are taken literally.
Cars From The Gigafactories
The Model Y will be the first of Tesla’s vehicles that will be produced at Tesla’s Gigafactories, as Musk announced that the company plans to build the Model Y completely at its Gigafactory 1 in Sparks, Nevada. (The Model S, Model X, and Model 3 are produced at its factory in Fremont, California, with some parts coming from the Gigafactory.)
In parallel, the company will ramp up production at Gigafactory 3 in Shanghai, China, where Tesla plans to go from a muddy lot to cars rolling out the door in less than a year. Model 3 will be the first vehicle produced there, with Model Y following not long after in high volume in 2020, if all goes well.
“Tesla has the first wholly owned manufacturing facility in China of any automotive company. This is profound,” Musk said. Tesla pulled the trigger on the location of the Shanghai Gigafactory within a few days of China removing the requirement to have local partners for manufacturing plants in the country. That gives Tesla full control over the factory and a leg up on its foreign automotive competition in the Chinese market.
Tesla shared on the earnings call that, thanks to government support and “extremely compelling interest rates,” Tesla expected to bring the new factory online in record time, and at a significantly lower cost. “As a ballpark figure, it’s probably about a half a billion dollars capex” to get Gigafactory 3 up and running at a 3,000 vehicle per week rate by the end of 2019.
Building batteries and cars from a single factory is not a new vision for Tesla, which makes the prospect of building cars effectively from raw material up through the finished product at a single factory that much more exciting. Clearly tons of materials and parts still need to be shipped in, but minimizing non-value add transportation and logistics expenses helps Tesla to optimize its cost picture and, ultimately, keep the price of its products as low as possible for as many customers as possible.
Have a read of our live blog summary of the Tesla Q4 2018 call (and letter) or head over to Tesla’s Investor Relations site to read Tesla’s Q4 2018 earnings letter and listen to the webcast recording for more juicy details from an exciting quarter for Tesla.
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