E Lack Of Success At "Gigafactories" Does Not Predict Anything Good For Tesla

Currently Tesla (TSLA) has 4 so-called "Gigafactories". Tesla calls them "Gigafactories" but in fact they are just factories. The prefix "Giga" is just promotional for Tesla's extreme stock promotion. In Fremont, California, it makes cars, in Nevada it makes batteries in cooperation with Panasonic and in Buffalo it makes solar cells. Below I will outline the problems with each of these factories and then I will discuss the new factory in Shanghai and the proposed factory in Berlin.

The car factory in California (factory 1)

In 2010 Tesla bought a car factory in Fremont from a company owned by Toyota and General Motors. This factory was for sale because it is not competitive to produce cars in California due to high wages there.

At the moment Tesla produces all models in this factory 1. The model S and X each have their own assembly line. Unfortunately demand for the S and X is decreasing fast, in the US and abroad. In particular very few of these cars are still sold in Europe and the S hardly sells in China. These cars have a lot of competition from better quality cars from other car manufacturers, such as from Jaguar, Audi and Porsche. Therefore, I expect sales of the model S and X to decline pretty fast. What does not help either are decreasing incentives for these cars in California beginning December 3, 2019.

Tesla also makes the model 3 in factory 1. It uses two production lines. One production line is in a tent, and the other one is in the factory building itself. I suppose the better quality model 3's are produced in the factory building. What we do know is working conditions can be hash in the tent, especially in summer and winter. This production line is probably also less automated than the model 3 production line in the factory building.

An important metric is the number of cars produced per employee per year. The previous owners of the factory in Fremont produced about 400,000 cars with about 5,000 employees, so 80 cars per employee per year. This year, at peak model 3 production Tesla produces at most 400,000 cars, and probably less with about 10,000 people. So only 40 cars per employee per year. Next year it will be less because part of the production will be done in the new factory in Shanghai. 

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