Reinventing Production: How Tesla plans to manufacture the Model 3 [Part 2]

Yesterday, we got a chance to take a look at some of Tesla's aggressive plans to address the strong demand (~400,000 pre-orders) for its Model 3. In addition to factory optimization strategies, Tesla Motors [NASDAQ: TSLA] is also looking to expand its factory size (and staff) to address growth. Also, regardless of Model 3's bright future ahead, Tesla's flagship sedan, the Model S, is already outselling the Mercedes S-Class and BMW 7-series combined. If Model X sales growth mirrors that of the Model S, Tesla's SUV could also be destined to be a strong seller in its competitive set. That said, with strong demand for all of Tesla's vehicles, CEO Elon Musk is planning big changes to reinvent production at the company.

Above: Tesla Motors factory in Fremont, California (Source: Tesla)

To that end, InsideEVs reports via the San Francisco Chronicle that, "Tesla’s new long-range plan could double [the] size of [its] Fremont factory... Much of the expansion efforts would be to support expected high demand for the upcoming Tesla Model 3." Here are five key findings from Tesla’s plan (from recent city filings):

• 1. Tesla Motors’ Fremont factory could roughly double in size
• 2. New buildings could be added near the paint shop, in its parking lot and on land next to the test track
• 3. Tesla purchased a 25-acre lot just north of the factory
• 4. Tesla could add 4.6 million square feet of space to the facility that’s now 4.5 million square feet
• 5. Expansion plans could add 3,100 jobs

Above: Tesla's Fremont factory expansion plans are represented by the green and red proposed areas above (Source: Electrek)

Electrek reports in more detail on staffing increases and the larger context behind Tesla's factory expansion: "currently 6,210 Tesla employees [are] working in Fremont on two shifts, that number is expected to increase to 9,315 after the expansion." So why is all this happening? "After receiving around 400,000 reservations for the Model 3 earlier this year, Tesla announced its plans to achieve a production rate of 500,000 cars per year at the factory by 2018. That’s close to the same output that the plant had when it was being operated by Toyota and GM. This new expansion aims to support the new production plan." 

Above: Tesla's big plans to grow its Fremont factory (Source: CBS SF Bay Area)

Furthermore, "CEO Elon Musk said that Tesla’s overall production could increase to 1 million vehicles by 2020 and while it’s not clear if all vehicles will be produced at the Fremont factory, he did say that he sees a path to the plant allowing for a total output of 1 million cars." Tesla's management has noted the need to go beyond Tesla's Fremont factory and open other production factories around the world. During the 2016 1Q earnings call, Tesla CEO Elon Musk admitted, "at some point its going to make sense to have a plant in Europe and China... [and that it] makes sense to do localized production on a continent basis."

Above: Tesla in Tilburg (top: GT Spirit; middle/botom: @hhussey)

At this time, Tesla does have a smaller final assembly and distribution facility in Tilburg, Netherlands (see above). And, rumors have surfaced about a Tesla factory in China. More information could be revealed regarding the Fremont factory and overall worldwide factory expansion plans on Tesla's October 26th third quarter 2016 financial results and corresponding conference call with top management. We'll be reporting on that event in a few weeks. Until then, you can get a closer look at Tesla's proposed future expansion plans for its Fremont factory by checking out their presentation deck below...

Source: Tesla Master Plan Final Copy Summer 2016 by Fred Lamert on Scribd via Electrek