Tesla EV Revolution Has A Lot of Work Ahead
August 7, 2013 in Electric Vehicles, EV News, Model S, Tesla
- Tesla is production constrained by a tiny fraction of suppliers
- Tesla Model S, long way to go to satiate demand
- Tesla needs more battery cell production to achieve its larger goals (Generation III)
Tesla tweet: “Velkommen Model S! The first deliveries outside North America began today in Oslo!”
Photo courtesy of Tesla
Tesla is production constrained in the near-term. A tiny fraction of parts suppliers are unable to ramp production. Tesla CEO Elon Musk hopes to have this situation resolved by Q2 of 2014. He stated on the Q2 conference call: “90% of our suppliers are able to ramp up. 5% have some difficulty. 4% have a lot of difficulty, and 1% just can’t.” He added: “We are striving to become demand limited as opposed to production limited.”
Mr. Musk sounded a bit frustrated on the Q2 call in discussing the parts situation. However, the company had previously said in a BusinessWeek interview in mid-July that it had managed to ramp production to 500 units a week, which is 26,000 units on an annualized basis. Undoubtedly, the parts issue will be a discussion topic on the next conference call.
Tesla Moving Forward
The company expects Model S demand to be north of 40,000 units in late 2014. Tesla’s Second Quarter 2013 Shareholder Letter states: “If demonstrated demand in North America and Europe is matched by similar demand in Asia, annualized sales for Model S could exceed 40,000 units per year by late 2014.” Beyond 2014, Mr. Musk sees Model S demand increasing as the EV market matures, but he did not elaborate on the Q2 call with any specific estimates. He stated: “There’s a pretty long, long way to go. [interruption/Pause] It’s sort a like an S curve of technology adoption.”
On the subject of Generation III, CEO Musk stated that new battery cell factories need to be built in order to produce half million Gen III cars a year. He remains confident that Tesla will produce this mass-market EV at around $35,000, but he emphasized that Tesla needs a lot of battery cells. He added later that the company is working very closely with Panasonic (battery supplier) to improve the cost of batteries.
Mr. Musk had previously stated that the Gen III will have access to the free Supercharger network, and he reaffirmed on the call that the battery range is expected to be about 200 miles.
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