In Tesla’s Q4 update on Wednesday, it shared some information on 2020 production plans. One tidbit from these plans is that the company expects to no longer be production-constrained at the end of the year.
If this happens, it could finally mean an end to parts shortages and logistical constraints that have affected Tesla’s service departments for quite some time now. Things have certainly been getting better, but it would be nice to see that stigma of the Tesla experience disappear.
Tesla has been pushing hard to scale up production to try to deliver as many cars as possible. Last quarter, they set another record for deliveries and production, showing good progress on that front.
But for much of last year, Tesla was pushing hard to get to 100k deliveries in a quarter, and only managed to eke it out in Q4, having missed that target by about 3,000 in Q3.
In the rush to deliver cars, this has meant that all of Tesla’s production is going toward creating finished goods, with little capacity left over to produce spare parts that can be used for service.
This has resulted in a difficult service situation for some Tesla owners, who have reported long waits for service appointments and even longer wait times for parts to show up while the car is in the shop. The problem has gotten bad enough that there have been some large order cancellations.
Tesla is trying to improve the situation by expanding their service presence at “max speed,” but even that is still slow-going. Over the course of the last year, Tesla expanded physical presence in store and service locations by only 13%, despite a 46% uptick in Model 3 sales over the same period.
Tesla also increased mobile service fleets by 81%, which helped to take some pressure off crowded service centers. Perhaps most impactfully, Tesla also stopped suggesting yearly service for their cars, alleviating a lot of unnecessary checkups.
But none of this has solved the problem with parts shortages. You can put more service employees on the road, you can keep cars out of the shop for checkups, but neither of those actions will help to replace parts that need replacing if those replacement parts don’t exist.
So, this is where Tesla’s production ramp comes in. Tesla currently has capacity to produce 550k Model 3s and plans to reach at least 650k capacity between Model 3 and Y by the end of this year. But Tesla also guided for just 500k deliveries over the course of this year — a number that should be easy for the company to reach, given their current installed capacity.
Tesla even explicitly called this out in their Q4 report, stating that “production will likely outpace deliveries this year.” This would be a first for the company, which has been production-constrained since the Model S started deliveries.
So what happens to that excess capacity? Tesla will probably not build completely to their capacity (especially since some of that capacity won’t come online until late in the year), and some cars will be kept internally in the company, but much of that excess could be used for service parts. Rather than completing vehicles for delivery, Tesla could ship off those parts to service centers to lessen the pressure there.
This would help with Tesla’s factory logistics, too, as the company shared some comparative photos between their Fremont factory and the new Shanghai factory:
These photos show a much more complicated manufacturing setup in Fremont. With Fremont producing roughly a thousand cars a day, that’s a lot of metal to haul from building to building in the process of putting together a car.
So skipping those final steps and shipping parts off to service centers could reduce some complexity there, too.
To be clear — this article is a speculative exercise. But given Tesla’s statements about production this week, this certainly seems like a plausible way out for Tesla’s parts problems.
Despite the constant talk about quality of Tesla vehicles and poor service experiences, I’ve never experienced this myself. As an early Model 3 owner with a low-VIN, early model car, I’ve got one of the cars that should be more prone to failure than most. But it’s been fine so far. Of course, that ought to be the expectation for any vehicle, and anecdotes aren’t data.
But we should remember that, on the internet, you really only hear from the people who are extraordinarily unhappy, and those voices get amplified. Which is fine — companies should do everything they can to stop situations like this from happening, where an owner might be without their car for weeks, waiting for a part that really should be in stock.
Tesla hasn’t done enough yet to stop situations like this from happening, but it looks like there could be a light at the end of the tunnel. But it remains to be seen if Tesla will allocate parts this way — or even if demand might be higher than they think. If it is, and they continue to sell every car they can make, then perhaps they won’t end up having spare capacity by the end of the year after all. 500k total deliveries in 2020 seems like a lowball estimate, but it remains to be seen how much of a lowball it is.
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