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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing for news outlets such as iNVEZZ and…

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Tesla Starts 24h Shifts In Attempt Ramp Up Model 3 Production

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Tesla’s halt of Model 3 production is due to a comprehensive set of upgrades that will allow it to ramp up production to up to 4,000 cars per week in May, when another upgrade will set up for a “burst-build target rate” of 6,000 vehicles per week by end-June, according to a leaked email sent by Elon Musk to Tesla employees at around 12:30 p.m. Pacific on Tuesday.

“Please note that all areas of Tesla and our suppliers will be required to demonstrate a Model 3 capacity of ~6000/week by building 850 sets of car parts in 24 hours no later than June 30th,” Musk wrote in the email obtained by Jalopnik, adding that all Model 3 production at Fremont will move to 24/7 operations.

This means that Tesla will be adding another shift to general assembly, body and paint, Musk said, now targeting 1,000 more Model 3s per week by June than the 5,000-per-week target the company affirmed earlier this month when it reported that Q1 production rates came in below its own target.

“The reason that the burst-build target rate is 6000 and not 5000 per week in June is that we cannot have a number with no margin for error across thousands of internally and externally produced parts and processes, amplified by a complex global logistics chain. Actual production will move as fast as the least lucky and least well-executed part of the entire Tesla production/supply chain system,” Musk wrote in the email.

In the ‘profit’ section of the leaked email, Musk said that Tesla is now at a point in which it will strive to be profitable. While he tweeted last week that Tesla would be profitable and cash flow positive in Q3 and Q4, so it obviously doesn’t need to raise money, in the email Musk was not so upbeat and rather focused on cost cuts.

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“A fair criticism leveled at Tesla by outside critics is that you’re not a real company unless you generate a profit, meaning simply that revenue exceeds costs. It didn’t make sense to do that until reaching economies of scale, but now we are there. Going forward, we will be far more rigorous about expenditures. I have asked the Tesla finance team to comb through every expense worldwide, no matter how small, and cut everything that doesn’t have a strong value justification,” Musk wrote.

“All capital or other expenditures above a million dollars, or where a set of related expenses may accumulate to a million dollars over the next 12 months, should be considered on hold until explicitly approved by me,” the chief executive told his employees in the email.

According to stock analyst Jim Collins, Musk’s leaked email raises more questions than it answers, including how another shift at Model 3 production lines will impact Tesla’s costs, how an auto maker can manufacture cars 24/7, and what the core profit margin of the Model 3 is. According to Collins, when Tesla reports Q1 financials—for which it hasn’t set a date yet—the company’s financial resources will be “stretched thin.”

By Tsvetana Paraskova for Oilprice.com

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