Tesla is missing one deadline after another for its first mass-market car Model 3. The electric vehicle maker just had its worst quarter ever. While the company is looking to speed up Model 3 deliveries, it is also working on the next-gen Model Y SUV crossover. The Model Y production is still a few years away. When the vehicle officially launches, it will be rolled out of Tesla’s upcoming China factory.
Chinese Model Y production facility will be ready by 2020
Only a few days ago, the Wall Street Journal reported that the Elon Musk-led EV maker had reached an agreement with the Shanghai municipal government to set up a “wholly-owned” factory in the city’s free-trade zone. Tesla will be the first international automaker to establish a factory in China without having to partner with a local manufacturer. However, the WSJ claims that the vehicles produced at the new plant might still attract a 25% import duty.
During Tesla’s third-quarter earnings call, Elon Musk told investors that the Shanghai factory would start rolling out cars in “about three years.” It matches the Model Y production timeline. Musk has previously indicated that the Model Y would go on sale in late 2019 or 2020. Currently, the company produces all its cars at the Fremont facility in California, though it also does some assembly in the Netherlands.
Michael Mauboussin: Here’s what active managers can do
The debate over active versus passive management continues as trends show the ongoing shift from active into passive funds. Q2 2020 hedge fund letters, conferences and more At the Morningstar Investment Conference, Michael Mauboussin of Counterpoint Global argued that the rise of index funds has made it more difficult to be an active manager. Drawing Read More
Musk added that Tesla had no plans to build the Model S or Model X at the new China plant. The upcoming facility will only produce Model 3 and Model Y to meet the local demand, he said. The vehicles might also be exported to China’s neighboring countries. Tesla’s electric vehicles attract a 25% import duty in China. The China facility will hopefully remove the duty, and drastically reduce the logistical costs related to shipping the vehicles from the US to China.
China is the world’s largest automobile market, and one of the biggest markets for Tesla. The country accounted for more than $1 billion revenue for the Elon Musk-led company last year. Musk told investors earlier this week that the new factory could produce “hundreds of thousands” of cars per year starting 2020. Manufacturing the vehicles locally is the “only way to make the cars affordable in China,” said the serial entrepreneur.
Tesla disappoints investors
Tesla recently recorded disappointing third-quarter results. The company posted a net loss of $671.1 million, though revenues went up 7% YoY to $2.98 billion. Its total loss through the first nine months of this year has swelled to $1.66 billion. Tesla had incurred a loss of $336 million in the previous quarter. Tesla shares dipped more than 6% on Thursday following the poor quarterly results.
Another thing that disappointed investors was that Tesla wouldn’t be able to meet its Model 3 forecasts for an additional three months. The company had earlier forecast that it would achieve a Model 3 production rate of 5,000 units per week by the end of 2017. Now it aims to reach that target by the end of March 2018. Given Tesla’s history, we can expect the Model Y production also to get delayed.
Model Y to be based on the Model 3 platform
The Model Y will be a compact and affordable SUV. Tesla has confirmed that it will be built using the Model 3 architecture, which means there will be some carryover components. It also means that the EV maker will be able to bring the vehicle to the market sooner while reducing the cost of development. It is said to have falcon-wing doors similar to the Model X.
Tesla is bullish on the Model Y because the SUV segment is growing rapidly even as the automobile industry is stagnant. The California company already has a presence in the SUV segment with the Model X, but it’s out of reach for most people. Autocar claims that the Model Y would be a fully autonomous car. It would feature a forward-facing radar system, 12 ultrasonic sensors, eight cameras, and a supercomputer that would process data 40x faster than previously, according to Autocar.
The rumor mill claims Model Y will be priced in the same range as the Model 3, catering to the masses. While Tesla has received roughly 500,000 pre-orders for the Model 3, the Model Y could sell even better. According to Morgan Stanley analyst Adam Jonas, Model Y will become Tesla’s highest selling vehicle when it comes out. Elon Musk has already been teasing the SUV crossover to build up excitement among fans.