Tesla is ploughing ahead with plans to localise parts for Chinese Model 3 production, increasing production of certain parts in new lines at its Shanghai Gigafactory.
The news, which was revealed in a document submitted to the Shanghai government and first reported by Reuters, comes as Tesla CEO and co-founder Elon Musk announced on Tuesday (Australian time) that the Californian car maker has made its one-millionth electric car.
Tesla stocks, meanwhile, have been taken down a notch, losing 13.6% on Monday to close at $US608 ($A925.91) as global uncertainty around coronavirus takes its toll and an oil price war plays out between Saudi Arabia and Russia.
Tesla had been on a meteoric tear for much of 2020 as previously reported by The Driven, and the recent tumble reflects a worldwide stock crisis that has seen markets post their biggest falls since the 2008 financial crisis.
But with oil hurtling down to $30 a barrel due to the Saudi/Russian stand off, Tesla and other pure electric car makers such as China’s Nio, along with renewables such as solar are feeling the pinch.
With market analysts such as CNBC’s Jim Cramer pointing to an imminent recession, the big question for Tesla investors and watchers is will the pioneering EV maker still be able to achieve its goal of rolling out 500,000 electric cars a year in 2020?
At Tesla’s fourth-quarter earnings call for 2019 in January, this certainly appeared achievable. With Fremont expansions to accommodate Model Y production to be finished by mid-2020 and its new Shanghai factory on line, the company reported that “vehicle deliveries should comfortably exceed 500,000 units”.
Musk said at the call that in order to achieve lower production costs for the Made-in-China Model 3 at the Shanghai factory, Tesla would aim to localise 100% of parts by the end of 2020.
Automakers are scrambling for car parts in preparation for a possible pandemic that could grind supply chains to a halt, and with China the ground zero for the coronavirus, the concern of investors and analysts is that Tesla’s plan to localise all parts by the end of 2020 might hit a speed bump.
“A major part of the Tesla bull thesis is centered around the company’s ability to ramp (Shanghai’s) Giga 3 production and demand in China to the key (3,000-vehicle) threshold per week over the next 12 to 18 months,” Dan Ives of LA investment firm Wedbush was quoted as saying by MarketWatch.
“From a demand perspective we now believe hitting the 100k+ units level in the first year” of Shanghai Gigafactory output appears “unlikely,” Ives was quoted as saying.
However the new document reveals that the EV maker wants to near double capacity for cooling pipes for its thermal management systems, and add extra lines for more battery packs, electric motors and motor controllers, according to Reuters.
Other unconfirmed sources suggest that it has also already started ramping up production at the factory with the addition of a second shift to its assembly lines in mid-February.
The Shanghai factory, which went online in December 2019, had an annual production capacity of 150,000 according to the company’s quarterly reporting documents published in January.
Estimates vary on Shanghai output from 22 to 28 cars an hour, the upper end of which with the addition of a second 6-day -a-week, 10-hour shift could put annualised capacity for Shanghai at nearly 175,000.
Other estimates put Tesla’s global production since the end of 2019 at around 77,000 based on cumulative production until December 31 of approximately 923,000, and there are varied reports of a quarterly production estimate of between 103,000-116,000.
However Reuters also reports that China’s industry ministry is urging Tesla to ensure quality for its Made-in-China Model 3s is consistent with its US-made models after Chinese customers complained that their vehicles were delivered with version 2.5 hardware chips instead of Tesla’s version 3.0 hardware with proprietary AI chip.
Musk said in response to the complaints that the swap was only made due to supply issues for customers who did not order Full Self-Driving (FSD), and that if they purchased the “autonomous” add-on (it is not yet fully functional) the chip would be swapped free of charge.
Tesla sold almost 4,000 electric cars in February in China, about one in three of all electric vehicles sold that month according to the China Passenger Car Association and reported by Californian media site Baystreet.
Bridie Schmidt is lead reporter for The Driven, sister site of Renew Economy. She specialises in writing about new technology and has been writing about electric vehicles for two years. She has a keen interest in the role that zero emissions transport has to play in sustainability and is co-organiser of the Northern Rivers Electric Vehicle Forum.