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Tesla will not be able to scale its manufacturing capacity

79 points by Osiris30 11y ago

DennisP 11y ago
Something they don't mention is lithium supply. According to the Financial Times[1], that's a big problem for them: > Tesla will need about 24,000 tonnes annually of lithium hydroxide, according to Benchmark Mineral Intelligence, out of a market last year of 50,000 tonnes. > more than 70 per cent of which is found in Chile, Argentina and Bolivia. Due to growth in demand for electric batteries, the global lithium market is approaching a shortage, with no new supply coming on stream next year, say analysts. At the same time, battery factories being built in China are set to increase demand for lithium. > So far two companies have announced supply deals with Tesla, and neither is expected to produce substantial amounts of lithium until after 2020. > “The current strategy seems to be no direct investment but leveraging the Tesla name by signing ‘contingent’ contracts at unachievably low prices with junior mining companies who have never produced lithium chemicals,” > Albemarle of Baton Rouge, FMC Lithium of Philadelphia and SQM of Chile, the big producers of lithium, have not been willing to supply at the prices Tesla has demanded. [1] http://www.ft.com/intl/cms/s/0/4a924a64-99df-11e5-987b-d6cdef1b205c.html#axzz47yGaYlgt http://www.ft.com/intl/cms/s/0/4a924a64-99df-11e5-987b-d6cde... (To get around paywall, google "lithium supply tesla" and take the top result.)
- maxerickson 11y ago
  The 70% appears to be proven reserves (at least, I don't see reason to interpret it otherwise). The more interesting question is where supply can easily be developed. The much larger reserves elsewhere don't matter if a different mine is able to easily increase production to meet the demand.
- lorenzhs 11y ago
  Lithium is abundant, the question is just how well it can be extracted. For example, there is more Lithium in sea water than humanity can ever use to build batteries, but we still need to commercialize the extraction. So it's not that there isn't enough of the stuff, it's that there currently isn't that much of a need for it, so only the most easily accessible reserves are being tapped. That might cause supply issues in the short term, but long term, there's no shortage.
  - DennisP 11y ago
    In the long term future of humanity, sure. I'm talking about the next few years for Tesla, since that's the topic of OP's article. Production is increasing, but slowly, and even if Tesla were offering a price sufficient to motivate faster increases, it takes time to bring new projects online. Aside from building facilities, you eat a couple years just waiting for brine to evaporate: http://www.bloomberg.com/news/videos/b/3abb52e4-ea59-4ed9-8525-80e5765c701c http://www.bloomberg.com/news/videos/b/3abb52e4-ea59-4ed9-85...
- dkbrk 11y ago
  battery Li content = 80g / (kW hour) [1] Gigafactory total projected capacity 2020 = 85 GW hr/year [2] Gigafactory lithium metal demand = (80 g / (kW hour)) (85 GW hr/year) = 6800 t/year Gigafactory lithium hydroxide demand (anhydrous) = (6800 t/year) (23.95 g/mol / (6.941 g/mol)) = 23500 t/year Gigafactory lithium hydroxide demand (monohydrate) = (6800 t/year) (41.96 g/mol / (6.941 g/mol)) = 41000 t/year (FT article was evidently talking about anhydrous lithium hydroxide) price lithium hydroxide = USD 14000/t [3] price lithium carbonate = USD 10000/t [3] price lithium (from hydroxide) = USD 14000/t (6.941 g/mol / (23.95 g/mol)) = USD 4060/t price lithium (from carbonate) = USD 10000/t (2 6.941 g/mol / (73.89 g/mol)) = USD 1880/t (N.B. just cost of raw materials, not including cost of lithium extraction from salt by electrolysis) Gigafactory demanded lithium cost (from hydroxide) = (USD 4060/t) (6800 t/year) = USD 27 million/year Gigafactory demanded lithium cost (from carbonate) = (USD 1880/t) (6800 t/year) = USD 13 million/year Estimated world lithium reserves = 14 million t [4] Gigafactory proportional use of lithium reserves = (6800 t/year) / (14 million t) = 0.05%/year World production of lithium (2015) = 32500 t/year [4] Gigafactory proportional use of lithium production = (6800 t/year) / (32500 t/year) = 21% The FT article's estimate of 24000 t/year checks out for anhydrous lithium hydroxide. I do not know if 50000 t/year is an accurate number for worldwide lithium hydroxide production in 2015, but lithium hydroxide is not the only source for lithium and this would imply a worldwide supply of lithium of just 14500 t/year, which is contradicted by the figure of 32500 t/year from the USGS [4]. The estimated lithium demand of the Gigafactory (which matches the FT article's figures) are for the Gigafactory's total demand (both Powerwalls and cars) with the factory at full operating capacity in 2020. There is a number of years yet for lithium production to scale up. Even taking the Gigafactory's projected demands in 2020 against lithium production in 2015, it requires 'only' 21% of the market. Tesla would be a very large customer, perhaps the single largest in the wourld, but Tesla wouldn't exactly be required to corner the entire market. Supply and demand dynamics dictate that with increased demand, price will increase. The cost of the raw lithium salts would be on the order of USD 20 million/year for Tesla. Even with a price vastly inflated from here, it would be a small cost against Tesla's operating income. A single Gigafactory operating at full capacity would take over 2000 years to exhaust the USGS's estimate of world lithium reserves of 14 million t. [1]: http://electronics.stackexchange.com/a/34504 http://electronics.stackexchange.com/a/34504 [2]: http://www.zdnet.com/article/panasonic-to-pour-billions-of-yen-in-teslas-gigafactory-as-initial-investment/ http://www.zdnet.com/article/panasonic-to-pour-billions-of-y... [3]: http://www.abc.net.au/news/2016-01-13/lithium-graphite-the-new-mining-superstars-potash-ready-to-shine/7081388 http://www.abc.net.au/news/2016-01-13/lithium-graphite-the-n... [4]: http://minerals.usgs.gov/minerals/pubs/commodity/lithium/mcs-2016-lithi.pdf http://minerals.usgs.gov/minerals/pubs/commodity/lithium/mcs...
Etheryte 11y ago
What a boringly one-sided article.
jcfrei 11y ago
Tesla has yet to transition from a product first to a manufacturing first kind of company. Entry level cars are much more shaped by manufacturing possibilities rather than consumer demand. It's not unreasonable to assume that the Model 3 will be sold at a loss and then it will be a question about how much longer investors are willing to pour money into Tesla rather than how many cars they can sell. I'd buy a Tesla - it's a bargain. Unlike the stock.
yincrash 11y ago
It should be clarified that this is an op-ed. The author does not cite any hard facts, and the primary argument seems to be that the author believes that only Toyota's methods are the methods that work, and because Tesla isn't doing what Toyota did, but has ambitious goals, it will fail.
- tacos 11y ago
  Yeah yeah. But does anyone here with a history of building something more complicated than a Rails app want to bet real money that Musk will put a Dragon on Mars AND ship 500,000 Teslas in 2018? He's not exactly known for hitting his ship dates or volume targets.
  - deleted 11y ago
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  - newjersey 11y ago
    What is exactly the penalty for missing ship date targets? Slight cost increases? Lower profit margins? Do they have difficulty with cash?
    - T-A 11y ago
      - Until you start shipping, you are burning money. Hit 0 and you die. Tesla is widely believed to need another round before it starts shipping Model 3, even if everything goes to plan. [1] - US tax rebates for electric vehicles are phased out after a manufacturer has sold 200 000 of them. [2] The longer Tesla takes to start selling Model 3, the more it will have sold of the upmarket (hence less rebate-sensitive) S and X, the fewer price-sensitive Model 3s it will be able to sell at the rebated price. - Competitors are not standing still. Who knows what else will be available in 2019 or 2020? And how long will those 400k preorders stand in the face of delays when there are alternatives? [1] http://uk.businessinsider.com/tesla-to-raise-more-cash-2016-5 http://uk.businessinsider.com/tesla-to-raise-more-cash-2016-... [2] http://www.greencarreports.com/news/1085549_when-do-electric-car-tax-credits-expire http://www.greencarreports.com/news/1085549_when-do-electric...
ArcticCelt 11y ago
Worst case scenario, wouldn't it be conceivable that the guy who built a car and space rocket company from scratch now creates/buy a lithium mining and/or battery making company to be able to supply Tesla different projects (cars, powerwall)?
- hanniabu 11y ago
  And make it as autonomous as possible.
- chmaynard 11y ago
  Tesla is probably pursuing a partnership with a company like Toyota that can already mass-produce autos. If GM can do it, why not Tesla? (The author didn't mention that possibility, which makes me suspicious that he has an axe to grind against Tesla.)
deleted 11y ago
[deleted]
tacos 11y ago
"Autistic Charisma as a Service."
jblow 11y ago
First it was "electric cars are not viable technologically, they have no range, there is no charging infrastructure, etc." Then it was "electric cars are too expensive, they are rich peoples' toys, and mainstream consumers will never want them anyway." Now it is "Tesla will not be able to scale up to meet all the demand." The fact that EV naysayers have been forced to cycle through this spectrum of responses in less than 10 years should be a clue of some kind.
- vkou 11y ago
  Point #3 has always been true. Tesla has been having difficulties scaling production or making ship dates for years, now. I've yet to see anything that will convince me that they will ship 500,000 cars in 2018.
- erk__ 11y ago
  Teslas are still "rich peoples' toys" some places, model s cost 120000 USD for the cheapest model.
  - orik 11y ago
    Tesla's are really affordable cars in other places (Norway), due to tax incentives for electric vehicles over vehicles.
    - dagw 11y ago
      Not really, the basic no frills model S starts at over $80k. Sure that's a lot cheaper than other cars in the same performance class, but that's a far cry from being affordable.
    - izacus 11y ago
      A car that still costs 60.000EUR (and that's a really stripped down model) after incentives is nowhere near "affordable" for most of Europe, much less world.
  - deleted 11y ago
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vox_mollis 11y ago
Based on title, expected to see the article analyze lithium mining capacity, packaging constraints, limits to manufacturing efficiencies, P&L analysis of growth capital requirements, etc. Got "Toyota is better" instead.
xiphias 11y ago
Most silicon valley startups try to learn from the Toyota manufacturing process and improve on it. While Toyota got stuck, Tesla gets rid of the most inefficient part of manufacturing process: humans
- daughart 11y ago
  Humans play an important role in the continuous improvement process.
  - voicesarefree 11y ago
    Absolutely. Continuing with the Toyota example, more direct human involvement with the manufacturing process has been reintroduced [1] [1] http://www.bloomberg.com/news/articles/2014-04-06/humans-replacing-robots-herald-toyota-s-vision-of-future http://www.bloomberg.com/news/articles/2014-04-06/humans-rep...
    - xiphias 10y ago
      It's probably the way not to do things if you want to get to affordable supercars. The only way is to program robots to manufacture the cars from start to finish, and the development should be in software (teaching the robots to work better)
agumonkey 11y ago
What Tesla has, are Musks shoulders. He went pretty deep and pretty low to make this happen when it was nothing. Not to make him a supernatural being, but now that his ventures are stable and growing I expect him to be able to handle pressure and find solutions way easier than when Tesla almost went bankrupt.
karmicthreat 11y ago
This is probably the only direction available to Tesla. They can grow or lose market share over 5 years as the legacy automakers catch up. The biggest threat to Tesla now is that their logistics teams will be able to source sufficient materials. I think getting the manufacturing lines up and running will be a challenge, but one Tesla has met before. Financially can Tesla do it? I'd say yes, and they probably won't even have to do any fundraising to do so. They will probably be able to fund it completely through debt instruments. They are a good bet by any measure at this point.
maxander 11y ago
So Tesla has two problems, according to the article: - They can't ramp up production fast enough to keep up with the demand indicated by pre-orders. - Pre-orders are likely to be overstating demand substantially, since they are refundable and therefore vulnerable to speculation. ...Either one of these problems by itself could be a threat, but both together seem somewhat less worrying.
- pgwhalen 11y ago
  If you interpret "can't ramp up" as "can't ramp up without extreme cost/risk," one could envision both being a problem. They could go all in and fail to see the demand they were expecting.
whoisthemachine 11y ago
It's interesting because the software development strategy of break things fast is based off of agile methodologies developed by Toyota. If any place is primed to be the birthplace of a car company that emulates Toyota, then SV is it. And there's no reason tesla can't be one of those companies.
- apalmer 11y ago
  whoa whoa whoa... the foundation goal to which Toyota's strategies have been focused for the last 50 years have been explicitly towards improving quality of the vehicle once it leaves the factory... The time to market focus at the cost of quality that is a rational viable model in software is the antithesis of the toyota way...
cuttwested 11y ago
"For anyone who firmly believes in Musk and his potential to turn massive initial investments into equally massive profits -- as Jeff Bezos did at Amazon -- the vision of Musk manning the production line is brilliant branding. But for anyone with more than a passing knowledge of the auto industry, it shows how badly Musk fails to understand what he's up against."
sunstone 11y ago
This article is wrong headed in one very important way. Electric cars are fundamentally a much BETTER way to make cars. And that's why Musk (and other electrics with decent engineering) can count on selling all of his production.
pbreit 11y ago
Headline is misleading. Current source headline: "Tesla Needs More Than Elon Musk". Vs HN headline: "Tesla will not be able to scale its manufacturing capacity"
pbreit 11y ago
"shows how badly Musk fails to understand what he's up against" Lines like this is why writers write and doers do.
Animats 11y ago
Tesla's two top manufacturing execs quit just before Musk announced that he wanted volume production of the Model 3 in 2018 instead of 2020. You can imagine the discussions that went on. Perhaps in time details will surface. Tesla now faces transitioning from a low-volume high-margin manufacturer to a high-volume low-margin manufacturer. That's hard. HP, IBM, and Xerox tried that, and didn't do too well; all eventually exited the low end and downsized. Even Intel is exiting the low end; they're giving up on the tablet and phone market, as a YC article pointed out a few days ago. Tesla is trying for good, fast, and cheap at the same time. Tesla's track record is that they can do "good", but late and at a high price. (Space-X has "good" and "cheap", but is about two years behind announced schedules. Their competition is even slower, so that's OK.) Tesla looks like they're doing a good job of manufacturing, but their Fremont plant has 3,000 employees for 50,000 cars a year. That's 125 labor hours per car. They can't make a $35K price point with that. The big manufacturers are in the 15-30 hour range.[1] That's the big problem. Tesla needs to learn how to reach Toyota levels of production efficiency, and they have a long way to go. Making 500,000 cars a year isn't in itself an obstacle. The Mercedes A-class production line cycles every 40 seconds. That's 720 cars per shift. If that line ran 2 8-hour shifts (you need a shift for maintenance) and 7 days a week, it could build over 500,000 cars in a year. That's just one production line. It's getting that production line built, working, thoroughly debugged, and running at a low labor cost that takes some time. Tesla is going to need people who've done that before. [1] http://www.autonews.com/assets/PDF/CA2018861.PDF http://www.autonews.com/assets/PDF/CA2018861.PDF
- csours 11y ago
  Ways Tesla can scale up: 1. Add a lot of automation. Costs would be excessive. 2. Add a lot of people. Cost would be quite high. 3. Improve production process. A 10x improvement in production rate in two years would be incredible to see. 4. Add another factory. See points 1 and 2; also could not happen in 2 years. 5. Partner with another OEM. This seems to me the most viable way to Musk's goals in his timeframe. We shall see... 6. Suspend building Model S and Model X vehicles; concentrate all resources on the Model III.
- marvin 10y ago
  Good and insightful criticism. Thanks for the input :) A refreshing alternative to knee-jerk dismissal.
csours 11y ago
Disclaimer: I work for a Tesla competitor, any opinions are solely my own. I've noticed several questions on this thread about manufacturing. Since I have worked in auto manufacturing, I will share some thoughts in the following areas: EV Assembly is Simpler; Humans are inefficient; Musks' Desk by the End of the Assembly Line; and Tesla is Smarter than Toyota. This is intended as a VERY high level overview, expect many details to be glossed over. EV Assembly is Simpler: Electric vehicles are slightly simpler than Internal Combustion engines. This does make EV Assembly slightly simpler... but not much. Automotive Assembly plants consume parts and make finished vehicles. Assembly plants have three main areas: Body, Paint, and General Assembly. Tesla's Fremont plant has these 3 areas. What is because Tesla makes EVs? Not the Body Shop, not the Paint shop. Is General Assembly simpler? Not by much. GA is split in two areas - Trim and Chassis. Trim no less complex on an EV than ICE. Part of the Chassis process is simpler. So, part of 1/2 of 1/3 of the Assembly process is easier in the Assembly plant; call it 10% less complex (1/6 = 17%, but only part of that 17% is simpler). Humans are Inefficient (also, Four Function Robot):* Efficiency, and engineering is all about trade-offs. In my opinion Musk will not be able to automate his way to 500k vehicles per year. Humans are often perceived as inefficient because: software engineers (and most of the people reading this) tend to value their time highly and strongly dislike repetitive tasks. The perception is that if the task is automated, it is a better use of a persons' time. This can be true. This is why all auto OEMs have some automation in manufacturing. Humans, however are better in a number of ways: humans are great at learning new tasks quickly and cheaply, humans require much lower capital expenditure to hire (they may be more expensive in the long run, but 2 years is not the long run) Automation can also be inefficient depending on the parameter chosen. At one point Tesla had a multi-function robot that changed it's "hand" for each vehicle to perform different task. Changing the hand takes time, which Tesla cannot afford if they want to build 500k vehicles/year. Yes, you can simply add more robots, but that costs money. As Tesla has been setting up its manufacturing process, it may have in mind future expansion and speed-up; but it has been solving current problems. Automation in particular can be troublesome to speed up (most definitely following the 80/20 rule). Portions of the assembly line may have to be re-structured to allow parallel operations, which can be expensive and time consuming. Also, the assembly operation(s) in question have to be engineered with automation in mind (else it will be amazingly expensive). This is entirely possible, but I don't see a major breakthrough in 2 years alongside a major vehicle launch. Musks' Desk by the End of the Assembly Line (and Tesla is Smarter than Toyota): This item in particular makes me shake my head in disbelief. On a recent earnings call, Musk said that his desk is next to the end of the production line [desk]. This suggests that Musk is attempting to inspect his way to quality. Do you know who tried to inspect their way to quality? GM (among many others). Do you know who has a good reputation for quality? Toyota. [quality] In addition (and more pertinent to the speed-up question), quality has a quantity all its own. If you use high quality parts, you can put them together more quickly and more reliably, and thus in higher numbers. If you produce high quality vehicles, you can ship them more quickly, and again, in higher numbers. In other words, the defects are not being added to the vehicle at the end of the assembly line, and they cannot easily be removed at the end of the line. Can you test your way to high quality software? Can you inspect your way to high quality vehicles? [desk]: http://qz.com/676127/no-need-to-worry-elon-musks-desk-is-right-at-the-end-of-the-tesla-production-line/ http://qz.com/676127/no-need-to-worry-elon-musks-desk-is-rig... [quality]: 1. Musk is certainly doing more than just inspection, but his words send a very naive message. 2. GM and other companies perceived as low quality have actually caught up to, and surpassed Toyota. http://www.jdpower.com/press-releases/2015-us-initial-quality-study-iqs http://www.jdpower.com/press-releases/2015-us-initial-qualit...
lazylizard 10y ago
how does tesla compare to byd? http://www.europeanfinancialreview.com/?p=5603 http://www.europeanfinancialreview.com/?p=5603 http://www.byd.com/news/news-313.html http://www.byd.com/news/news-313.html i think byd had pretty big claims when they started out into cars too..but went quiet after awhile...but somehow they'd survived and its been more than 10yrs since they started...

79 points by Osiris30 11y ago

Something they don't mention is lithium supply. According to the Financial Times[1], that's a big problem for them: > Tesla will need about 24,000 tonnes annually of lithium hydroxide, according to Benchmark Mineral Intelligence, out of a market last year of 50,000 tonnes. > more than 70 per cent of which is found in Chile, Argentina and Bolivia. Due to growth in demand for electric batteries, the global lithium market is approaching a shortage, with no new supply coming on stream next year, say analysts. At the same time, battery factories being built in China are set to increase demand for lithium. > So far two companies have announced supply deals with Tesla, and neither is expected to produce substantial amounts of lithium until after 2020. > “The current strategy seems to be no direct investment but leveraging the Tesla name by signing ‘contingent’ contracts at unachievably low prices with junior mining companies who have never produced lithium chemicals,” > Albemarle of Baton Rouge, FMC Lithium of Philadelphia and SQM of Chile, the big producers of lithium, have not been willing to supply at the prices Tesla has demanded. [1] http://www.ft.com/intl/cms/s/0/4a924a64-99df-11e5-987b-d6cdef1b205c.html#axzz47yGaYlgt http://www.ft.com/intl/cms/s/0/4a924a64-99df-11e5-987b-d6cde... (To get around paywall, google "lithium supply tesla" and take the top result.)

maxerickson 11y ago
The 70% appears to be proven reserves (at least, I don't see reason to interpret it otherwise). The more interesting question is where supply can easily be developed. The much larger reserves elsewhere don't matter if a different mine is able to easily increase production to meet the demand.
lorenzhs 11y ago
Lithium is abundant, the question is just how well it can be extracted. For example, there is more Lithium in sea water than humanity can ever use to build batteries, but we still need to commercialize the extraction. So it's not that there isn't enough of the stuff, it's that there currently isn't that much of a need for it, so only the most easily accessible reserves are being tapped. That might cause supply issues in the short term, but long term, there's no shortage.
- DennisP 11y ago
  In the long term future of humanity, sure. I'm talking about the next few years for Tesla, since that's the topic of OP's article. Production is increasing, but slowly, and even if Tesla were offering a price sufficient to motivate faster increases, it takes time to bring new projects online. Aside from building facilities, you eat a couple years just waiting for brine to evaporate: http://www.bloomberg.com/news/videos/b/3abb52e4-ea59-4ed9-8525-80e5765c701c http://www.bloomberg.com/news/videos/b/3abb52e4-ea59-4ed9-85...
dkbrk 11y ago
battery Li content = 80g / (kW hour) [1] Gigafactory total projected capacity 2020 = 85 GW hr/year [2] Gigafactory lithium metal demand = (80 g / (kW hour)) (85 GW hr/year) = 6800 t/year Gigafactory lithium hydroxide demand (anhydrous) = (6800 t/year) (23.95 g/mol / (6.941 g/mol)) = 23500 t/year Gigafactory lithium hydroxide demand (monohydrate) = (6800 t/year) (41.96 g/mol / (6.941 g/mol)) = 41000 t/year (FT article was evidently talking about anhydrous lithium hydroxide) price lithium hydroxide = USD 14000/t [3] price lithium carbonate = USD 10000/t [3] price lithium (from hydroxide) = USD 14000/t (6.941 g/mol / (23.95 g/mol)) = USD 4060/t price lithium (from carbonate) = USD 10000/t (2 6.941 g/mol / (73.89 g/mol)) = USD 1880/t (N.B. just cost of raw materials, not including cost of lithium extraction from salt by electrolysis) Gigafactory demanded lithium cost (from hydroxide) = (USD 4060/t) (6800 t/year) = USD 27 million/year Gigafactory demanded lithium cost (from carbonate) = (USD 1880/t) (6800 t/year) = USD 13 million/year Estimated world lithium reserves = 14 million t [4] Gigafactory proportional use of lithium reserves = (6800 t/year) / (14 million t) = 0.05%/year World production of lithium (2015) = 32500 t/year [4] Gigafactory proportional use of lithium production = (6800 t/year) / (32500 t/year) = 21% The FT article's estimate of 24000 t/year checks out for anhydrous lithium hydroxide. I do not know if 50000 t/year is an accurate number for worldwide lithium hydroxide production in 2015, but lithium hydroxide is not the only source for lithium and this would imply a worldwide supply of lithium of just 14500 t/year, which is contradicted by the figure of 32500 t/year from the USGS [4]. The estimated lithium demand of the Gigafactory (which matches the FT article's figures) are for the Gigafactory's total demand (both Powerwalls and cars) with the factory at full operating capacity in 2020. There is a number of years yet for lithium production to scale up. Even taking the Gigafactory's projected demands in 2020 against lithium production in 2015, it requires 'only' 21% of the market. Tesla would be a very large customer, perhaps the single largest in the wourld, but Tesla wouldn't exactly be required to corner the entire market. Supply and demand dynamics dictate that with increased demand, price will increase. The cost of the raw lithium salts would be on the order of USD 20 million/year for Tesla. Even with a price vastly inflated from here, it would be a small cost against Tesla's operating income. A single Gigafactory operating at full capacity would take over 2000 years to exhaust the USGS's estimate of world lithium reserves of 14 million t. [1]: http://electronics.stackexchange.com/a/34504 http://electronics.stackexchange.com/a/34504 [2]: http://www.zdnet.com/article/panasonic-to-pour-billions-of-yen-in-teslas-gigafactory-as-initial-investment/ http://www.zdnet.com/article/panasonic-to-pour-billions-of-y... [3]: http://www.abc.net.au/news/2016-01-13/lithium-graphite-the-new-mining-superstars-potash-ready-to-shine/7081388 http://www.abc.net.au/news/2016-01-13/lithium-graphite-the-n... [4]: http://minerals.usgs.gov/minerals/pubs/commodity/lithium/mcs-2016-lithi.pdf http://minerals.usgs.gov/minerals/pubs/commodity/lithium/mcs...

Etheryte 11y ago

What a boringly one-sided article.

jcfrei 11y ago

Tesla has yet to transition from a product first to a manufacturing first kind of company. Entry level cars are much more shaped by manufacturing possibilities rather than consumer demand. It's not unreasonable to assume that the Model 3 will be sold at a loss and then it will be a question about how much longer investors are willing to pour money into Tesla rather than how many cars they can sell. I'd buy a Tesla - it's a bargain. Unlike the stock.

yincrash 11y ago

It should be clarified that this is an op-ed. The author does not cite any hard facts, and the primary argument seems to be that the author believes that only Toyota's methods are the methods that work, and because Tesla isn't doing what Toyota did, but has ambitious goals, it will fail.

tacos 11y ago
Yeah yeah. But does anyone here with a history of building something more complicated than a Rails app want to bet real money that Musk will put a Dragon on Mars AND ship 500,000 Teslas in 2018? He's not exactly known for hitting his ship dates or volume targets.
- deleted 11y ago
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- newjersey 11y ago
  What is exactly the penalty for missing ship date targets? Slight cost increases? Lower profit margins? Do they have difficulty with cash?
  - T-A 11y ago
    - Until you start shipping, you are burning money. Hit 0 and you die. Tesla is widely believed to need another round before it starts shipping Model 3, even if everything goes to plan. [1] - US tax rebates for electric vehicles are phased out after a manufacturer has sold 200 000 of them. [2] The longer Tesla takes to start selling Model 3, the more it will have sold of the upmarket (hence less rebate-sensitive) S and X, the fewer price-sensitive Model 3s it will be able to sell at the rebated price. - Competitors are not standing still. Who knows what else will be available in 2019 or 2020? And how long will those 400k preorders stand in the face of delays when there are alternatives? [1] http://uk.businessinsider.com/tesla-to-raise-more-cash-2016-5 http://uk.businessinsider.com/tesla-to-raise-more-cash-2016-... [2] http://www.greencarreports.com/news/1085549_when-do-electric-car-tax-credits-expire http://www.greencarreports.com/news/1085549_when-do-electric...

ArcticCelt 11y ago

Worst case scenario, wouldn't it be conceivable that the guy who built a car and space rocket company from scratch now creates/buy a lithium mining and/or battery making company to be able to supply Tesla different projects (cars, powerwall)?

hanniabu 11y ago
And make it as autonomous as possible.
chmaynard 11y ago
Tesla is probably pursuing a partnership with a company like Toyota that can already mass-produce autos. If GM can do it, why not Tesla? (The author didn't mention that possibility, which makes me suspicious that he has an axe to grind against Tesla.)

deleted 11y ago

[deleted]

tacos 11y ago

"Autistic Charisma as a Service."

jblow 11y ago

First it was "electric cars are not viable technologically, they have no range, there is no charging infrastructure, etc." Then it was "electric cars are too expensive, they are rich peoples' toys, and mainstream consumers will never want them anyway." Now it is "Tesla will not be able to scale up to meet all the demand." The fact that EV naysayers have been forced to cycle through this spectrum of responses in less than 10 years should be a clue of some kind.

vkou 11y ago
Point #3 has always been true. Tesla has been having difficulties scaling production or making ship dates for years, now. I've yet to see anything that will convince me that they will ship 500,000 cars in 2018.
erk__ 11y ago
Teslas are still "rich peoples' toys" some places, model s cost 120000 USD for the cheapest model.
- orik 11y ago
  Tesla's are really affordable cars in other places (Norway), due to tax incentives for electric vehicles over vehicles.
  - dagw 11y ago
    Not really, the basic no frills model S starts at over $80k. Sure that's a lot cheaper than other cars in the same performance class, but that's a far cry from being affordable.
  - izacus 11y ago
    A car that still costs 60.000EUR (and that's a really stripped down model) after incentives is nowhere near "affordable" for most of Europe, much less world.
- deleted 11y ago
  [deleted]

vox_mollis 11y ago

Based on title, expected to see the article analyze lithium mining capacity, packaging constraints, limits to manufacturing efficiencies, P&L analysis of growth capital requirements, etc. Got "Toyota is better" instead.

xiphias 11y ago

Most silicon valley startups try to learn from the Toyota manufacturing process and improve on it. While Toyota got stuck, Tesla gets rid of the most inefficient part of manufacturing process: humans

daughart 11y ago
Humans play an important role in the continuous improvement process.
- voicesarefree 11y ago
  Absolutely. Continuing with the Toyota example, more direct human involvement with the manufacturing process has been reintroduced [1] [1] http://www.bloomberg.com/news/articles/2014-04-06/humans-replacing-robots-herald-toyota-s-vision-of-future http://www.bloomberg.com/news/articles/2014-04-06/humans-rep...
  - xiphias 10y ago
    It's probably the way not to do things if you want to get to affordable supercars. The only way is to program robots to manufacture the cars from start to finish, and the development should be in software (teaching the robots to work better)

agumonkey 11y ago

What Tesla has, are Musks shoulders. He went pretty deep and pretty low to make this happen when it was nothing. Not to make him a supernatural being, but now that his ventures are stable and growing I expect him to be able to handle pressure and find solutions way easier than when Tesla almost went bankrupt.

karmicthreat 11y ago

This is probably the only direction available to Tesla. They can grow or lose market share over 5 years as the legacy automakers catch up. The biggest threat to Tesla now is that their logistics teams will be able to source sufficient materials. I think getting the manufacturing lines up and running will be a challenge, but one Tesla has met before. Financially can Tesla do it? I'd say yes, and they probably won't even have to do any fundraising to do so. They will probably be able to fund it completely through debt instruments. They are a good bet by any measure at this point.

maxander 11y ago

So Tesla has two problems, according to the article: - They can't ramp up production fast enough to keep up with the demand indicated by pre-orders. - Pre-orders are likely to be overstating demand substantially, since they are refundable and therefore vulnerable to speculation. ...Either one of these problems by itself could be a threat, but both together seem somewhat less worrying.

pgwhalen 11y ago
If you interpret "can't ramp up" as "can't ramp up without extreme cost/risk," one could envision both being a problem. They could go all in and fail to see the demand they were expecting.

whoisthemachine 11y ago

It's interesting because the software development strategy of break things fast is based off of agile methodologies developed by Toyota. If any place is primed to be the birthplace of a car company that emulates Toyota, then SV is it. And there's no reason tesla can't be one of those companies.

apalmer 11y ago
whoa whoa whoa... the foundation goal to which Toyota's strategies have been focused for the last 50 years have been explicitly towards improving quality of the vehicle once it leaves the factory... The time to market focus at the cost of quality that is a rational viable model in software is the antithesis of the toyota way...

cuttwested 11y ago

"For anyone who firmly believes in Musk and his potential to turn massive initial investments into equally massive profits -- as Jeff Bezos did at Amazon -- the vision of Musk manning the production line is brilliant branding. But for anyone with more than a passing knowledge of the auto industry, it shows how badly Musk fails to understand what he's up against."

sunstone 11y ago

This article is wrong headed in one very important way. Electric cars are fundamentally a much BETTER way to make cars. And that's why Musk (and other electrics with decent engineering) can count on selling all of his production.

pbreit 11y ago

Headline is misleading. Current source headline: "Tesla Needs More Than Elon Musk". Vs HN headline: "Tesla will not be able to scale its manufacturing capacity"

pbreit 11y ago

"shows how badly Musk fails to understand what he's up against" Lines like this is why writers write and doers do.

Animats 11y ago

Tesla's two top manufacturing execs quit just before Musk announced that he wanted volume production of the Model 3 in 2018 instead of 2020. You can imagine the discussions that went on. Perhaps in time details will surface. Tesla now faces transitioning from a low-volume high-margin manufacturer to a high-volume low-margin manufacturer. That's hard. HP, IBM, and Xerox tried that, and didn't do too well; all eventually exited the low end and downsized. Even Intel is exiting the low end; they're giving up on the tablet and phone market, as a YC article pointed out a few days ago. Tesla is trying for good, fast, and cheap at the same time. Tesla's track record is that they can do "good", but late and at a high price. (Space-X has "good" and "cheap", but is about two years behind announced schedules. Their competition is even slower, so that's OK.) Tesla looks like they're doing a good job of manufacturing, but their Fremont plant has 3,000 employees for 50,000 cars a year. That's 125 labor hours per car. They can't make a $35K price point with that. The big manufacturers are in the 15-30 hour range.[1] That's the big problem. Tesla needs to learn how to reach Toyota levels of production efficiency, and they have a long way to go. Making 500,000 cars a year isn't in itself an obstacle. The Mercedes A-class production line cycles every 40 seconds. That's 720 cars per shift. If that line ran 2 8-hour shifts (you need a shift for maintenance) and 7 days a week, it could build over 500,000 cars in a year. That's just one production line. It's getting that production line built, working, thoroughly debugged, and running at a low labor cost that takes some time. Tesla is going to need people who've done that before. [1] http://www.autonews.com/assets/PDF/CA2018861.PDF http://www.autonews.com/assets/PDF/CA2018861.PDF

csours 11y ago
Ways Tesla can scale up: 1. Add a lot of automation. Costs would be excessive. 2. Add a lot of people. Cost would be quite high. 3. Improve production process. A 10x improvement in production rate in two years would be incredible to see. 4. Add another factory. See points 1 and 2; also could not happen in 2 years. 5. Partner with another OEM. This seems to me the most viable way to Musk's goals in his timeframe. We shall see... 6. Suspend building Model S and Model X vehicles; concentrate all resources on the Model III.
marvin 10y ago
Good and insightful criticism. Thanks for the input :) A refreshing alternative to knee-jerk dismissal.

csours 11y ago

Disclaimer: I work for a Tesla competitor, any opinions are solely my own. I've noticed several questions on this thread about manufacturing. Since I have worked in auto manufacturing, I will share some thoughts in the following areas: EV Assembly is Simpler; Humans are inefficient; Musks' Desk by the End of the Assembly Line; and Tesla is Smarter than Toyota. This is intended as a VERY high level overview, expect many details to be glossed over. EV Assembly is Simpler: Electric vehicles are slightly simpler than Internal Combustion engines. This does make EV Assembly slightly simpler... but not much. Automotive Assembly plants consume parts and make finished vehicles. Assembly plants have three main areas: Body, Paint, and General Assembly. Tesla's Fremont plant has these 3 areas. What is because Tesla makes EVs? Not the Body Shop, not the Paint shop. Is General Assembly simpler? Not by much. GA is split in two areas - Trim and Chassis. Trim no less complex on an EV than ICE. Part of the Chassis process is simpler. So, part of 1/2 of 1/3 of the Assembly process is easier in the Assembly plant; call it 10% less complex (1/6 = 17%, but only part of that 17% is simpler). Humans are Inefficient (also, Four Function Robot):* Efficiency, and engineering is all about trade-offs. In my opinion Musk will not be able to automate his way to 500k vehicles per year. Humans are often perceived as inefficient because: software engineers (and most of the people reading this) tend to value their time highly and strongly dislike repetitive tasks. The perception is that if the task is automated, it is a better use of a persons' time. This can be true. This is why all auto OEMs have some automation in manufacturing. Humans, however are better in a number of ways: humans are great at learning new tasks quickly and cheaply, humans require much lower capital expenditure to hire (they may be more expensive in the long run, but 2 years is not the long run) Automation can also be inefficient depending on the parameter chosen. At one point Tesla had a multi-function robot that changed it's "hand" for each vehicle to perform different task. Changing the hand takes time, which Tesla cannot afford if they want to build 500k vehicles/year. Yes, you can simply add more robots, but that costs money. As Tesla has been setting up its manufacturing process, it may have in mind future expansion and speed-up; but it has been solving current problems. Automation in particular can be troublesome to speed up (most definitely following the 80/20 rule). Portions of the assembly line may have to be re-structured to allow parallel operations, which can be expensive and time consuming. Also, the assembly operation(s) in question have to be engineered with automation in mind (else it will be amazingly expensive). This is entirely possible, but I don't see a major breakthrough in 2 years alongside a major vehicle launch. Musks' Desk by the End of the Assembly Line (and Tesla is Smarter than Toyota): This item in particular makes me shake my head in disbelief. On a recent earnings call, Musk said that his desk is next to the end of the production line [desk]. This suggests that Musk is attempting to inspect his way to quality. Do you know who tried to inspect their way to quality? GM (among many others). Do you know who has a good reputation for quality? Toyota. [quality] In addition (and more pertinent to the speed-up question), quality has a quantity all its own. If you use high quality parts, you can put them together more quickly and more reliably, and thus in higher numbers. If you produce high quality vehicles, you can ship them more quickly, and again, in higher numbers. In other words, the defects are not being added to the vehicle at the end of the assembly line, and they cannot easily be removed at the end of the line. Can you test your way to high quality software? Can you inspect your way to high quality vehicles? [desk]: http://qz.com/676127/no-need-to-worry-elon-musks-desk-is-right-at-the-end-of-the-tesla-production-line/ http://qz.com/676127/no-need-to-worry-elon-musks-desk-is-rig... [quality]: 1. Musk is certainly doing more than just inspection, but his words send a very naive message. 2. GM and other companies perceived as low quality have actually caught up to, and surpassed Toyota. http://www.jdpower.com/press-releases/2015-us-initial-quality-study-iqs http://www.jdpower.com/press-releases/2015-us-initial-qualit...

lazylizard 10y ago

how does tesla compare to byd? http://www.europeanfinancialreview.com/?p=5603 http://www.europeanfinancialreview.com/?p=5603 http://www.byd.com/news/news-313.html http://www.byd.com/news/news-313.html i think byd had pretty big claims when they started out into cars too..but went quiet after awhile...but somehow they'd survived and its been more than 10yrs since they started...