Tesla turns to Model Y, as Model 3 slowly exits "production hell" | RenewEconomy

Tesla turns to Model Y, as Model 3 slowly exits “production hell”

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Elon Musk hails a “phenomenal year” for Tesla, but it is still draining cash as it looks to its next EV model, and extracts itself from production hell on the last.

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Tesla has rounded out what founder and CEO Elon Musk described this week as a “phenomenal year” with a slightly slower cash burn rate, and on slightly more forgiving level of “production hell”, according to the company’s latest results letter and analyst briefing.

The company released its Q4 2017 result on Wednesday night in the US, reporting negative free cash flow of $276.8 million – the lowest in more than a year – and $675 million in losses attributable to shareholders; notching up almost $2 billion in losses for the whole year.

And it’s not about to ease up on the spending. The company told analysts in a briefing call that it is set to make some capital investments towards the end of the year towards the next EV in the series, the Model Y. (That will make the range from Model S, 3, X and Y).

Tesla also expects to meet its 2020 target of 1 million cars a year, Musk said on Wednesday, which as Business Insider has noted, will require a giant manufacturing leap, considering the company made just over 100,000 vehicles in 2017.

That said, Tesla made $3.3 billion in revenue, largely thanks to the Model 3, while future customers spent tens of millions just to join the queues for the Tesla Semi and Roadster models that Musk showed in November.

As Ars Technica put it “unlike other doomed companies posting dire losses quarter after quarter, Tesla revenues have been sizable… For the year, the company reported almost $US12 billion in revenue. People want Tesla products, but Tesla can’t stop spending more money than it has.”

Speaking to analysts on Wednesday night, Musk said that 2017 had been “on balance, a phenomenal year,” with the launch of the company’s first mass production car, the Model 3; the unveiling of the Tesla Semi; and the installation of the world’s biggest lithium-ion battery right here in Australia.

But it was also a year of manufacturing setbacks that Musk said, last quarter, had put the Model 3 “deep in production hell.”

One quarter later, Musk says the company is “still a few levels deeper (in hell) than we’d like to be,” but was on track to deliver 2500 vehicles by the end of March, and 5,000 by the end of Q2.

Musk said the Model 3 production hell resulted from the company being a little bit overconfident, and a little too complacent about the company’s ability to make batteries.

“It’s ironic since battery modules should be the thing we are best at,” Musk told analysts. But he also said the company had learned many invaluable lessons from the troubles, and made major strides in efficiencies along the production lines.

“If we can send a Roadster to the asteroid belt, we can probably solve the Model 3 problem,” he said.

“The competitive strength of Tesla long term is not going to be the car(s), it’s going to be the factory, we’re going to productise the factory,” he said.

Other things Musk said:

– Tesla expects to send one of its EVs on an autonomous coast-to-coast road trip in the US in three to six months.

– The Tesla big battery installed in South Australia last year had been is “exceeding its performance targets significantly,” and as a result of this success had boosted orders for the company’s commercial scale energy storage systems.

– He is reasonably confident the company can reach positive cash flow probably in Q3, four or five months from now.

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  1. Dennis Kavanagh 2 years ago

    No real progress on the Model 3 ramp is very disappointing. The rate that things are progressing (or not), it probably won’t get to Australia until 2020 which will be 4 years after I reserved one. Depressing!

    • david_fta 2 years ago

      In my case, even the act of reserving a Model 3 has been delayed by 4 years, thanks to the tanking of my renewable energy investments, thanks to the actions of Barnaby Joyce and his ilk.

      I wonder how Mr Joyce intends to justify his actions to all his children?

      • Roger Brown 2 years ago

        5 kids soon , wife 4 , staffer 1 .

        • mick 2 years ago

          class act that bloke-not

    • Ren Stimpy 2 years ago

      “probably won’t get to Australia”

      Yeh it probably won’t get to Timbuktu either. Tho’ we have similar federal governments atm.

  2. Craig Morris 2 years ago

    “If we can send a Roadster to the asteroid belt, we can probably solve the Model 3 problem.”


    Tesla sounds effed….

    • Dee Vee 2 years ago

      the Roadster wasn’t supposed to crash into an asteroid belt when it was launched. Sounds like the autopilot still has a few bugs.

      • Nick 2 years ago

        It didn’t “crash” into anything. You do know the asteriods are very far apart, right?

      • Matthew Jenkinson 2 years ago

        Average distance between the asteroids is estimated at about a million km. I think it will be fine.

        • JonathanMaddox 2 years ago

          Without LIDAR? You’re kidding! 😀

  3. MaxG 2 years ago

    People need to put this in perspective; a new automaker (car and truck), a new rocket company, a solar company, a battery company and a ‘boring’ company; all made from sweet nothing beating the incumbents who have been in business of almost 100 years; dinosaurs, like coal burners.

  4. Roger Brown 2 years ago

    They need to make a Model Commercial Vehicles , utes and delivery vans , buses and trains . I want to buy a commercial EV Van , like the Nissan NV200 . If not , will wait till 2019 and then you can import your own car , if they don’t supply Australia with the vehicles .

    • SomethingSomethingSomething 2 years ago

      I agree, I think a push into the shorter trip commercial vehicle market would have been a smarter play (albeit less sexy). The number of kms commercial vehicles travel would have made the fuel saving equation much sweeter for businesses, along with the reduced maintenance costs. I thought metro buses and delivery vehicles would have been the low hanging fruit. The emissions and noise reductions in urban environments alone would have been a big carrot for local government to incentivise the transition.

    • Michael Dufty 2 years ago

      Renault Kangoo is available in Australia now, if that is what you want. Or a second hand minicab i-miev

    • Steve Gates 2 years ago

      You can buy a renault E-Kangoo now in Aust if you have an ABN.

      • Roger Brown 2 years ago

        No ABN , I have a 2003 Holden Combo from new , at the moment , but need a bigger van, to fit motorbikes in it. I like the iload van size , but no EV-iLoad ? Might have to wait till 2019 and import a EV- NV200/300 , by that time , they might have a 60kWh battery .

  5. Dee Vee 2 years ago

    Wasn’t the Roadster supposed to stay in orbit around the Sun and Mars? Not crash into an asteroid belt!

  6. Hettie 2 years ago

    Much discussion below about commercial vehicles. There are also huge numbers of sedans owned by businesses and governments, hospitals, all sorts of enterprises. For them, operating costs are key, and EVs would seem to be no brainers for fleet replacement.
    Many vehicles parked in one location; ideal for solar plus battery on site recharge.
    Why target sales at individuals, when a company might want 60 cars? Or 200.

    • SomethingSomethingSomething 2 years ago

      It’s just a matter of time for the economics to start adding up for businesses, likely when vehicle costs come down more and the charging infrastructure develops. There’ll be a tipping point, hopefully sooner rather than later, where the cost advantages can’t be ignored and the take-up starts the hockey stick trend.

    • JonathanMaddox 2 years ago

      Because they don’t have the volume of production yet to satisfy business orders in a predictable timeframe. Demand from consumer “fans” and a few early adopter businesses is still far in excess of production rates.

      • Hettie 2 years ago

        That’s certainly true for Tesla, but what about Nissan Leaf and other makes?
        Tesla have been guilty of overselling their production capacity, which is asking for fed up customers to cancel and buy elsewhere. They have sold not just their own brand, but the whole concept of EVS.
        Not complaining, just pointing out that Tesla is not the only choice.

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