Tesla gives Model 3 production update: fixed some bottlenecks, plans new capacity with new lines

With the release of its second quarter 2018 financial results, Tesla gave an update on Model 3 production.

The automaker is reporting that it fixed some bottlenecks and they are now looking at producing more than 50,000 Model 3 vehicles during the current quarter.

Most importantly, Tesla is now claiming that they should be able to do 5,000 units per week on their main Model 3 general assembly line soon:

“Over the past 12 months, we have overcome bottlenecks across various stages of the Model 3 manufacturing process. Last quarter, it became clear that GA3, our main general assembly line, would likely become a production constraint if certain issues were not addressed. This assembly line, which is where we add all the components to a painted metal body, was designed to work with hundreds of robotic lifters that bring components to the line. Due to the density of the line and the relatively high downtime of the lifters, ramping GA3 became substantially more complicated than we had anticipated. That said, significant progress has been made in the last few months, and GA3 is now expected to reach a production rate of 5,000 per week very soon.”

Over the past month, Tesla has been compensating with the infamous GA4 line under a tent outside the factory in order to achieve the production rate.

Tesla elaborated on the situation in its shareholder letter:

“To address the short-term issues with GA3, we built GA4 to help us reach our 5,000 units per week target earlier and ultimately to push us past that point. We were able to build GA4 quickly due to the designed simplicity of the Model 3 architecture. The layout and processes of GA4 are similar to those of the Model S and X assembly line, while quality and cost of production are roughly equal to those of GA3. General assembly, excluding the cost of components, accounts for approximately 3% of Model 3 cost. The rest of our manufacturing processes remain highly automated, including stamping, body-welding, paint shop, powertrain assembly and battery pack assembly”

The automaker says that it has now achieved a production rate of 5,000 Model 3 cars “multiple times” since first achieving during the last week of the second quarter.

They reiterated their goal to be at 6,000 units per week by the end of August.

It appears that the ramp is not as steep anymore as Tesla focuses on quality. They wrote in the letter:

“No production target is more important than sustained quality, which is why every vehicle we produce goes through a thorough set of measurements and tests before it reaches the customer. Model 3 quality continues to improve every month and is already on par with Model S and X.”

Tesla is being more vague about the rest of the production ramp to 10,000 Model 3s per week – instead saying that they plan to get there “as fast as [they] can.”

They expect that most of the line will be ready to achieve that by the end of the year, but there will likely be some bottlenecks. They instead target the full production goal for “sometime next year”.

What is most interesting is that Tesla plans to get there with existing Model 3 lines rather than adding all new lines, which is resulting in a significant cut back on their capital expenditure by almost $1 billion.

For the current quarter, Tesla expects to produce 50,000 to 55,000 Model 3 vehicles.