I have to report this, as this is too big a deal not to mention. I am struggling to
believe it myself, but I struggled to believe it last time too, and it turned out to be true.
Sure I struggled to believe it, but I went through said struggle,
and still managed to believe it. Despite how hard it was to grasp.
I am referring to the numbers we heard that Tesla were building 1600 Model Ys a day in Shanghai,
back last month. And then when we calculated how many Tesla delivered in October, it came
it at around 1500, so basically turned out to be true, again as hard as it was for many to believe.
Well we are now hearing it again. According to the YouTuber Jason Yang, that Tesla are now producing
over 1,600 Model Ys a day in November. Which means my crazy projections for Q4, even my bull
case may have been a little pessimistic. But before you get too excited just yet,
that is not all I am hearing. Usually I would just tell you, but this is such a big deal,
I feel like I want to build up some anticipation, and throw in a bit of showmanship even.
But there is a lot more to this story so keep watching, as its a really big deal.
Firstly, last time I speculated on these reports and rumors, there were comments saying that I
was wrong, or it had been dis-proven, but it turned out to be real. It was so hard to fathom.
1600 Model Ys a day, 584,000 a year, almost 3 times the alleged capacity we were initially told.
The market still has yet to get to grips with this, or come to understand it.
They won't react until they see the delivery numbers for the quarter,
they are still estimating around 260,000 or something, my bear case was almost 300,000.
Tesla have about tripled their alleged capacity for Model Y in Shanghai.
Now factor that information into their new factories,
the ones that have been built after a lot more experience in manufacturing cars,
and building factories. Shanghai was their first custom factory build for autos. They learned a
lot. Add into that front and rear diecasts for the new factories, compared to just rear in Shanghai,
and structural battery packs, along with a plethora of other advanced manufacturing
techniques learned since and other economies of scale, like battery factories on site.
When you think about this then we can't begin to imagine the potential production rates we
might see from these new factories, we can only speculate, and those speculative numbers seem very
high, despite also seeming conservative relative to Shanghai. Just look at the size of Texas!
The market has not factored any of this in.
I have, and I have bought LEAPS as a result, and some of my LEAPS had a 2 year expiry date,
meaning I am giving the market 2 years to work this out for itself.
Hopefully it wont take that long, but these are big factories to ramp up and seeing is believing.
But the fact the Model Y in Shanghai is producing so far beyond our expectations, oh and this took
about 8 months by the way, from the start of production, to hit about triple capacity.
8 months, if you can believe that. Something which is also in contrary to what Elon has said.
He said it takes longer to ramp up than it does to build the factory itself. Yet we have 3 times
the capacity in 8 months from a factory that took 12 months to build. Oh wait, what if he what he
said was true, and they aren't actually finished ramping up the Model Y in Shanghai yet either?
So the Model Y had an alleged capacity of 200,000 units/yr
but was quite a bit smaller in size than the Model 3 factory in Shanghai.
And as a result the Model 3 had a claimed capacity of 250,000 vehicles a year, 25% more
than the Model Y factory, and it correlates too with the additional size of the factory. But why
is the Model Y at 1600 vehicles a day, making twice as many Model 3s at 800 vehicles a day?
That's a good question. Sure Model Y does use gigapresses which remove
300 robots from the production line, but that doesn't mean it should be making about
2 and half times as many vehicles per square foot as the Model 3. No,
I think Tesla just wanted to concentrate on ramping up the Model Y first,
as that is their best selling vehicle, with the highest margins. So they prioritized production
of the Model Y in Shanghai, and left the Model 3 at its 800 units a day in the meantime.
But the factor may have reached what might be capacity, for now, then perhaps Tesla are able to
get back to improving the Model 3 line, and adding some of these improvements that we have seen
on the Y line on to the 3, adding more shifts, production lines, working hours, more employees.
And yes, this could be very true, as we are now hearing reports that the Model 3 line has now
hit, get this, 2000 vehicles a day! Even more than the Model Y. And funnily enough,
a 25% larger facility, making 25% more vehicles, well the math seems to line up perfectly there.
That's right you heard it right, lets say it again, 2000 Model 3s a day at Shanghai,
and now over 1600 Model Ys a day. A total of over 3600 a day,
or over 1.3 million a year. Just from Shanghai. This is outstanding on every level. It actually
still means that Tesla could even break one million total deliveries for the year.
We had 54,000 deliveries in October from Shanghai, now if we are at 3600 a day from there, then
that's an additional 220,000, taking us to around 270,000 for the Quarter from Shanghai, add to that
an estimated 130,000 from Fremont, and we just hit 400,000, or an annual capacity of 1.6 million.
Yes, this does mean we are all going to be very rich, but it also means Tesla are
making much faster progress than we initially assumed for the mission of sustainable energy.
We have been severely sandbagged.
I know it seems extreme, but so did the 1600 a day, and they did that. And like I say,
the Model 3 facility is 25% larger, and this is 25% more vehicles than the Model Y.
What does that mean for next year? It means 2 million deliveries likely just from Fremont
and Shanghai alone, and then whatever Texas and Berlin can do on top of that.
Also might we wonder that if Shanghai ramped up at such a pace,
that we might expect the same from Berlin and Texas, or possibly even more,
maybe a lot more with the additional gigapreses and structural battery packs.
Are we being sandbagged here too? More than likely, or at least I sure hope so.
However, I believe that this ramping up is due to Tesla using LFP batteries.
Remember how we hear how the Chinese EVs are able to ramp up so much faster, well it's because they
are less battery constrained using LFP batteries. This is what Tesla are doing, they are producing
standard range Model Ys in massive quantities, and now doing the same with Standard Range Model 3s,
to a whole other level than before. Not only that Tesla are raising their prices with their
Chinese models on top of this. Which means lower cost and higher prices and much higher margins.
Not to mention a higher level of volume production means greater economies of scale.
If this is true, then this company could be the biggest company early next year. The delivery
numbers will shock the market, the Q4 earnings will see profits like never before. The stock
price will hit escape velocity, added to that all the other events about to unfold.
I think this also means that Tesla are purchasing a huge proportion of CATL's batteries,
which might be reason why CATL have been expanding so much,
and spending so much on growth, because they have guaranteed sales from Tesla. In other words,
a huge proportion of the batteries CATL make will be going to Tesla, not the other Chinese EVs. The
other Chinese EVs are in no position to make so guaranteed purchase agreements from CATL,
at any level to make CATL justify such a huge expansion, Tesla is the only one that can,
well BYD probably could afford to as well, but they are making in-house batteries.
So bear this in mind, the Chinese battery ramping, may predominantly be ear marked for Tesla, and not
so much left for the other Chinese EVs. And Tesla will likely use the batteries for energy too.
But Tesla might also use them for a standard range Model Y from Berlin and Texas.
If Tesla are not going to have the standard range model Y in those factories,
then we may not expect such a large ramp up from these factories next year,
and it will be more dependent on the pact they ramp the 4680 batteries.
Also I would just like point out that these LFP batteries like save Tesla about 40% per battery
pack, when compared the nickel packs they were using, or perhaps $3,000 per vehicle, which is
about 7% of the car price, in other words, that is roughly 7% more gross margin per car. What
I am saying is despite it being standard range model 3s and Ys coming out of China, and despite
them being the lowest cost models, they still have great margins. Which means great profits.
All of this is going to be felt as early as January when we see the delivery numbers
and the Q4 financials. I might have to go ahead and do a super bull case for Q4 now,
and I am guessing you will all want to see that, judging by your comments on how much
you wanted to see the standard bull case, so why not. But go ahead and comment anyway,
to let me know how much of a priority I should make it.
Just remember all of this is indicative only, and going on a rumor. But I have explained how
the rumor could very well be true too. Due to the facility being 25% larger. Also remember
although these numbers are from November, we don't know when in November it actually started.
So I will do what I can to actually revise my Q4 estimates for my super bull case,
to at least make it accurate, rather than just assuming it started from the start of November.
It's just very exciting and wanted to share my initial thoughts on it all with you.
Ok, maybe I jumped the gun a little on 400,000 for the quarter,
as we don't know when in November this started, but either way, it might be around 360,000 or so.
And as we know anything over 300,000 is great too. Although now I would feel
almost disappointed if it was only 300,000, I think I got my hopes up. Bear in mind we
are going from 240,000 last quarter, just to say that 50% growth in deliveries QoQ.
We can only imagine what it means for profit, well at least until I calculate it.