Elon Musk-led Tesla is still struggling to ramp up production of the mass-market Model 3 car, but the company doesn’t want Model 3 woes to affect its future plans. Sources familiar with the matter told Reuters that Tesla is planning to start Model Y production by November 2019. Automotive component suppliers have received a Request for Information (RFI) from the EV maker about Model Y parts.
According to Reuters, the Model Y production will take place at Tesla’s existing facility in Fremont. The company is also setting up a factory in China. But the China plant would be able to roll out the first Model Y in 2021 or later, Reuters noted. Two sources told the publication that suppliers expect Tesla to produce 500,000 Model Y units per year in the United States. The China factory would produce the vehicles in smaller quantities, probably tens of thousands, to meet the local demand and export to neighboring countries.
Tesla has started accepting preliminary bids for supplier contracts on the compact SUV crossover. Without revealing much about the Model Y program, the company told potential suppliers that the vehicle would be built at the Fremont plant starting November 2019. Automakers tend to choose parts suppliers for a new vehicle about 2-3 years before it enters production.
The Model Y production timeline suggests that Tesla would finalize suppliers less than 18 months before production commences. One of the sources told Reuters that it was “aggressive, but possible.” Since Model Y will be based on the same platform as Model 3, it’s possible for Tesla to meet the aggressive production start date. Elon Musk is well known for “aggressive timelines and high risk-tolerance.”
To speed up the Model 3 production, Tesla had skipped a pre-production testing phase for the car and jumped directly to production tooling. The EV maker is still dealing with manufacturing bottlenecks. Tesla had received roughly 500,000 pre-orders for the Model 3 sedan. The lower Model 3 production volume has affected Tesla’s revenue stream. The company told investors recently that the weekly Model 3 output had doubled to 2,000 units in the first quarter, and would rise further to 5,000 units per week in the second quarter, which would translate to 250,000 units per year.
Tesla claims it would not need to raise fresh funds for capital expenditures. But research firm Moody’s said last month that Tesla could raise more than $2 billion as its cash reserves continue to deplete. Model 3 production issues aside, Tesla has many other projects in the pipeline that would require a lot of investment. It recently unveiled a new Roadster and a Tesla Semi. The new Semi is also rumored to enter production in 2019 while the Roadster would come out in 2020. Also, the company continues to invest money in its Gigafactory battery facility.
Earlier this year, Elon Musk told investors that the company aimed to have a production capacity of one million Model Y units per year, though he did not specify a timeline. The existing Fremont facility has a maximum capacity of 500,000 cars per year. Musk believes Tesla could potentially double that output. Tesla will also be building the Model 3 at the same plant. So, it will have to set up a new manufacturing plant in the United States in the future.
Suppliers told Reuters that Tesla “did not provide volume estimates for the Model Y.” Parts suppliers use an automaker’s production volume targets, their capability to execute, and consumer demand to estimate how many vehicles are going to be produced. Elon Musk told investors in February that capital investments related to Mode Y production would start towards the end of 2018.
Tesla has a remarkable history of missing the self-imposed deadlines. Even if Model Y production starts in November 2019, there is a good chance the first customer deliveries would begin only in early 2020. Last year, the company aimed to start Model 3 production in early July. Tesla somehow managed to start delivering the Model 3 just a few weeks after the deadline, but the deliveries were only limited to a small number of employees. Hundreds of thousands of pre-order customers are still waiting for their Model 3.
The Model Y SUV crossover should give Tesla a big boost in terms of revenues. Crossover sales have been growing much faster than sedans in the US, representing a lucrative opportunity for Tesla. Though Model Y would be based on the same platform as Model 3, it would bring many changes to the battery architecture and wiring to simplify the manufacturing process.
According to Autocar, the Model Y crossover would have fully autonomous driving capabilities. It would be equipped with a forward-facing radar system, 12 ultrasonic sensors, eight cameras, and a super computer that could process data 40 times faster than previously.