Tesla have announced a new plant and plan to start work on it, as soon as this
month. Where is this new plant? Well it's going to be in Shanghai. In fact it is just an extension of
the current site. Apparently the extension will be enough to double the production capacity in China,
to meet growing demand in the country and exports, two people familiar with the matter told Reuters.
The article goes on to say that "Once the new plant is fully operational, Tesla will have
the capacity to produce up to 2 million cars per year at its expanded Shanghai facility,
the company's main export hub, according to the people, who asked not to be identified in
discussing still-private plans." 2 million a year produced,
just in China. To give you some comparison, Toyota produced 1.6 million vehicles in China in
2021. Tesla will be producing more vehicles than anyone else in China, the largest auto market.
But 2 million capacity? We have seen Model Y run rate at close to a million alone.
Surely with Model 3 combined at full production speed Tesla could be in the low millions,
especially when we add in phase 3 that is currently being developed.
Well yes, and actually the articles goes into further detail on Giga Shanghai also.
The article says "Expansion plans for the existing plant aim to put Tesla on track to produce around
1 million vehicles this year". The expansion plans they are referring to are presumably phase 3.
But one million vehicles this year? That is even above my estimate, at around 900,000 for the year.
However, mine is based on scarce chip supply, so it's possible that if Tesla
produce 100,000 more units in China, it might mean 100,000 fewer units at other plants.
Either way, these chip shortages are just a temporary issue.
One million from China is incredible, it's more deliveries than Tesla did
all of last year, yet from just one of their 4 locations. The article also says "Tesla has
projected to take its weekly production to about 22,000 vehicles at the plant in the
coming months, one of the sources said." 22,000 a week, in the coming months,
so perhaps around May or so. 22,000 a week is almost 100,000 a month. This is huge.
That production rate would be over 1.1 million vehicles over a year.
This would then imply that the new factory would thus have a capacity of 900,000
given that we were told Tesla would total 2 million.
Will this be a big factory then? No, I wouldn't have thought so, I would say that
Tesla can produce that quantity of vehicles in a factory similar to the size of Model 3
Shanghai. Due to all the new production processes, requiring a lot less space for the same output.
This is all big news, so let's go through what it means, or could mean.
Now is that so surprising? 22,000 a week, is about 95,000 a month, we saw around 70,000
deliveries from China in December. I think this further increase to the existing factories is
going to be due to phase 3 being complete. This will be to accommodate the capacity of the new
battery factory already operational from CATL a few blocks down the road from giga Shanghai.
That might imply that this new factory Tesla are building in
China will be to accommodate this next new factory that CATL are going to build.
It makes sense right? Tesla and CATL are both starting a new factory at the same time.
Although according to the YouTuber Wu Wa, he thinks this new factory is for development of
intelligent technology integrated electric chassis. It is unknown whether CATL will
co-operate with them in the future. However, even if that is the case, it is still likely there are
going to be some battery lines there too, to cater to the new plant. If we have 60 kWh batteries, for
2 million cars, then we need 120 GWh of batteries, the other battery plant is about 80 GWh.
It took Tesla a year from breaking ground on giga shanghai until cars were coming off
the production line. Therefore we would expect this new factory to be even faster if anything.
If this is the case though, and time it right with the extra battery production CATL could offer,
then it would align in about right, once Tesla has this new factory ramped up,
which, judging by the previous Model Y factory, won't take long,
maybe hitting these numbers as early as the end of next year. Implying China should already be
at a run rate of 2 million vehicles a year, at the start of 2024. Of course this number will
not cap at 2 million, it will be continually improved, dependent on CATL battery supply.
Just off the top of my head, perhaps Fremont is 750,000, and the other 2 might be at a run rate of
1.5m by then, although I would hope more. Either way though, that would put the start of 2024
at a run rate of 4.25 million. And we do expect Tesla to continue to expand, even in 2024.
We would expect this new location announced this year, and to start building next year,
and then start production in 2024 also. But outside of China
the production numbers will be due to how many 4680 batteries Tesla are producing.
If Tesla have hit a run rate of 1.5 million 4680 models, then that would possibly be only
around 100 GWh. We were told on battery day that Tesla would produce 100 GWh in 2022.
We were then told in the shareholder meeting, that we should hit a run rate of 100 GWh by
the end of this year. We have had no update as to the expected run rate for 4680 since.
But I would get the impression that perhaps Tesla might be around 100 GWh of 4680 batteries in 2023.
Perhaps starting 2024 with a run rate of 150 GWh, or enough
for over 2 million 4680 vehicles, some from the new factory.
Well that's enough batteries for another 750,000 vehicles, taking the total to run rate to 2m
from China, 1.5m from the new factories, 750,000 from Fremont, and 750,000 from these additional
batteries. Well, that comes to a 5 million run rate. Wow. This is 2024 mind you though. So if
we had 1.7m this year, and even if we had 3m in 2023, well 5m is still a huge jump in 2024.
No? Did I miss something? Oh right yea, I see. The 2024 number isn't quite right
is it? This number was calculated as the run rate at the start of the year,
and we said that Tesla would still be growing in 2024. Again, you can ignore all the factories,
the number of factories and capacities, as they are moot. We only need to focus
on 4680 battery production. Oh and perhaps the LFP ramping up in China.
Well what if Tesla hit a run rate of 250 GWh by the end of 2024.
Perhaps producing 200 GWh of 4680 batteries, enough for about 3 million 4680 vehicles.
And if CATL also increased their production particularly with their
new research facility. Well what if China also increased capacity a further 50% to 3 million.
What if some of the other battery makers are also supply 4680 batteries to Tesla,
or even LFP batteries possibly from Panasonic. Anyway, add this up, we have over 6.5 million
vehicles for 2024. Ok, as soon as I can get 2025 LEAPS, I'm all in!
This would be an absolutely absurd amount revenue, accompanied with even crazier margins.
This is also only a couple of year ago. And FYI, for reference, when a company increases sales by
6.5 million, and a lot of those additional sales were the higher end Model Y Long Range, with the
more profitable 4680 batteries, and economies of scale has kicked in and costs are relatively
diminishing. Then just because the deliveries have increased 6.5 times, well that doesn't mean profit
increases 6.5 times. Although I would like to know the answer to how profitable that would be,
I might run some numbers in another video. Anyway, I am sure it is at least 20 times
the current profit. And annualized we are at around $10 billion from last quarter. That would
mean $200 billion of profit, or a p/e ratio of under 5 at today's low low prices. Ok, these are
totally back of the napkin math, I just like how easily u can make the numbers so big with Tesla.
And no we are not allocating any of these batteries for energy,
as 4680 was not designed for energy.
What with what Tesla have learned in the past, their new factory may be for a new car,
and I have an idea what it may be. Could it actually be Tesla are going to make the
compact at this factory. That's what some people are speculating again. Of course not. Besides this
factory would only produce 900,000 cars, that would not be anything close to meeting demand.
Yet at the same time Tesla have demand until next year for their current models in some markets now.
Why oh why, would they want to launch a low cost model that doesn't make very good margin,
that will cannibalize their high margin products. This would in no way be a smart move for Tesla,
and no it's doesn't serve the mission better either. It is not going to be any new model.
It won't be the X or S, or obviously not the Cybertruck either.
No the factory will produce the 3 and or the Y. But the new version. Front and rear diecast
with all the other latest manufacturing techniques and technology in the car.
Combine that with CATL's evolution of battery technology, perhaps even somewhat helped by
Tesla in this new factory. Maybe not all the trade secrets, but a few easy ones,
enough to make a difference somewhat in range. Perhaps a range that will be suitable for more
markets for the Model Y. Perhaps approaching 250 miles. And possibly a Model 3 with 300 miles.
Remember Tesla has all this demand, yet hasn't launched the biggest selling product
in US or European markets yet, a standard range model Y. Let me know if you want me to run some
financials on China hitting 2 million to see if we can estimate the value of Tesla China.