A Different Kind of Circus Comes to Fremont: Tesla Pitches a Tent To Save Model 3 and Itself
Tesla tries to find solutions to its debt and cash problems by using the Model 3 before a bankruptcy court does it for them. The good news is that some of the new changes may save Model 3 owners some money:
- Tesla pitches a gigantic never seen this size before tent next to factory to meet Model 3 demand and targets
- Model 3 reservers must now go online to order their car and pay an additional $2500
- Changes affect present and incoming Model 3 owners
- Pricing structure actually slashes some prices to make options cheaper, get around the lost tax credit, and compete with new competition
- Not guaranteed but wait time for the most popular variants is now 2-4 months.
- All this is a game changer as Tesla fights to stay alive so it can compete with new European sexy electrics
By pitching a tent outdoors and making a makeshift factory by installing an entire assembly line into it, Tesla Electric Motor Corporation launches a Hail Mary Manhattan Project of its own, never seen before perhaps in the entire history of the Industrial Revolution, let alone the car industry. To ensure it has done everything it can to satisfy shareholders and way before bankruptcy court becomes a viable option, Tesla even slashes prices on its do or die Model 3. One would think Tesla is getting ready to manufacture for a state of war. But in this case Tesla must wrestle its finances and keep promises before it can open its next theater of battle against the new European electric combatants.
It’s do or die time for Tesla
It’s coming down to crunch time for Tesla as the second quarter ends, the third quarter begins, and the half year mark passes through. This means we’ll know soon enough if the electric car company is building 5000 Model 3s a week as per their own production targets, if they’re starting to see a more positive cash flow with all these extra electric cars they’re building so that they can meet both customer demand and expenditures. They’re also going to need to find creative ways to raise cash while helping customers find other financing options, who were once counting on that Federal tax credit that’s about to soon expire for Tesla customers.
First Comes the Factory
Tesla needs the Model 3 so it can make critical decisions to ensure its survival, and they need do it now. Through the daily routine at Fremont, there was a sense of immediacy if not urgency, as life at the factory continued while a tent appeared next to it that seems to be the hanger for the airship Zeppelin, the Hindenburg. Perhaps this is what becomes of what Elon Musk once feared, as a “production hell.”
Amazing work by Tesla team. Built entire new general assembly line in 3 weeks w minimal resources. Love u guys so much! Pic of 1st Model 3 dual motor performance coming off the line … pic.twitter.com/Xr55P3fmGd
— Elon Musk (@elonmusk) June 16, 2018
Reaction to Tesla Fremont Tent City
“Words fail me. It’s insanity,” Max Warburton of Sanford C. Bernstein & Co., told the Chicago Tribune in apparent reaction to the tent. Warburton is an expert at what an auto assembly plant should have, and benchmarked auto-assembly plants around the world before becoming a financial analyst.
Auto analysts and experts were scratching their heads the past few days as the final assembly plant in Fremont CA saw a giant white tent the interior twice the size of a football stadium, pitched next to the factory, to add another assembly line so Tesla can meet its 5000 units per week target.
Hand assembly took months to delivery, robotic industrial maneuvers until dark took it to days.
Both share and reservation holders are diehard fans of both the brand and its CEO Elon Musk, seen as Apple’s Steve Jobs of the auto industry, but if he’s not careful from the late Mr. Jobs he risks becoming a Preston Tucker. His base is starting to get a bit impatient as the company is now about 450,000 cars in backlog. With the additional assembly line Tesla has recently added that makes it in many ways another factory, and with the steroided automation Tesla already has, those half million cars could now easily find their owners’ garages in just a few weeks or months. And this is what Tesla is capable of doing for a self inflicted crisis. It leaves the imagination to wonder the miracles they can do when a real serious one occurs. Their tent operation makes it appear Tesla can show up and build a car in a neighborhood near you.
To show where Tesla was at compared to now, Tesla reports almost a year ago in October 2017 they produced 260 cars and delivered 220. In the beginning most of the process was done by hand assembly. With the robotic automation they added, that robots hang from ceilings and walls to not step on one another, production now moves at a rapid pace in a carefully orchestrated dance of industrial maneuvers of grabbing, holding, welding, assembling, and passing on to another robot.
Tesla pitches a tent and breaks a glass ceiling
And it is at these telling moments that reveal if Tesla has mustered all its technology and industrial might to break that biggest corporate glass ceiling a company faces: to truly and finally transition themselves from being a niche low volume luxury bespoke car company they once were to an industrial powerhouse. Building Models S and X was no different in many ways like Rolls Royce Motor Cars is with their Phantoms and Ghosts. Tesla will now earn its stripes in the car industry as a high end high volume performance luxury car company if it succeeds. This makes them in similar ways of becoming a peer to Rolls Royce’s parent company, BMW.
What’s at stake: Elon Musk risks becoming the next Preston Tucker
But Tesla needs to first survive to be even able to take a victory lap. Contemplating is the most painful part for Tesla’s employees, shareholders, and customers. Like the car, the company, and the inventor Preston Tucker, Tesla is waging the risk of leaving behind a car that will most definitely become an iconic legacy of the 21st century to always remember who it’s named for, how and more importantly why it came about, where were you when you first saw one, its significance and impact on world automotive history. But if Musk isn’t careful, like Tucker, he risks making a spectacular car displayed in many museums, but made by its company that’s on the verge of bankruptcy, that it risks not even being remembered.
We car enthusiasts all know what a Tucker is. We had to see the movie to find out more about who made it. There by the grace of God may go Tesla.
What tax credit? This is what new Model 3 owners lose >
Timing is everything. With a backdrop of target deadlines, with another inevitable earnings call coming somewhere down the road at one end, it’s reckoning time at the other.
The first sacrificial lamb is the $7500 tax credit for future Model 3 owners. It’s now a forgone conclusion that Tesla will not be in a position to enable most Model 3 customers to take advantage of the full amount of the $7500 federal tax credit. You need to go to your local Chevy dealer now, if not later than early next year, if the full credit amount is that important to you.
Look up in the horizon, no right behind you, it’s a bird, it’s a cat, it’s an electric Jaguar!
The next thing Tesla lost was no competition. There’s another car backdrop Tesla knew was coming that took forever but it’s finally here. With their present problems at crisis proportions they can’t pay much attention to right now, but knew they had to make their customer base happy while the headlights of electric Jaguars, Porsches, and Audis, that once were looming for an eternity in the distant horizon, now suddenly are coming up right behind Tesla’s rearview mirror, tailgating them.
It took them forever to get here, but these cars travel fast! Regardless what comes in the comments section, these cars will offer stiff competition, that they had years to polish them before production. There here. Ironically thanks to Tesla.
Here’s the changes affecting upcoming and present Model 3 owners
Tesla had to find a way to make everyone walk away with something and stay within the customer base and be happier than they were a month ago with the same 450,000 backordered cars and $24 billion total debt spent at six grand every hour, while Tesla lives to see another month, maybe another quarter.
To address several issues all at once to get the most bang for their buck as quickly as possible in their pocket, Tesla had to rework its ordering and pricing structures and delivery timeframes to meet customer demand and shareholder expectations, save face that they still can keep a promise, but more importantly to raise quick cash to survive.
The answer is to do as the airlines do, and charge fees! Well, Tesla didn’t go crazy like some airlines, not yet, but what Tesla is asking its customers to do is to invest more in them once they get past the reservation waitlist, to go further on in the process if you’re that serious and committed.
Since Tesla basically floodgated the wait-list, I’d expect the wait time to be longer. Base model single battery packers add at least three months after the 6-9 months the early waitlist holders get their cars (see base model section).
Then Comes the Customer Pricing
This week the Palo Alto company sent an email to its Model 3 Reservation Holders to tell them that even though they won’t give customers a time period when their car will be ready for delivery, their car is nevertheless ready for assembly, and moving forward all Model 3 reservation holders will have to pay an additional $2500 fee to begin the ordering and assembly process. All of this money a customer will now have to pay does eventually go toward the total price of the car, including the initial $1000. They’re not paying anything extra or more. Once you order the car you have three days to change your mind, otherwise all of the $3500 will become nonrefundable. So get your timer . . .
This is how to get a Model 3 in the fastest time
To get a car in any reasonable amount of time, you now have 3 choices. The more popular the configuration the more quicker the chances of having it inside your garage:
1. the long-range 310-mile rear-wheel drive,
2. long-range dual motor all-wheel drive
3. the performance variant.
Right now the most popular variant is the AWD long range dual motor. So pick option 2 above to get a Model 3 in your garage ASAP.
Options options options it’s all about options
Right now they’re pushing all the premium options including the AWD, dual motor, rapid charging, and high performance variants of the car so they can make the most money. Early waitlisted base model single battery packers have to wait. So for example the AWD version now costs $1000 less and the performance package is now $11,000 less at $67,000 not the $78,000 it once was. Delivered customers will get a rebate.
What Ever Happened to the Model 3 Base Sedan?
The base sedan is considered to be the standard battery pack model with a range of 220 miles on a single motor, RWD. No ups or extras. I believe Tesla had good intentions at first that the logical and natural progression would be to take care of the base model customers first on the waitlist so their purchase can coincide with the tax credit. That’s counterintuitive to making the best of what you have first to give other potential customers a peak at what you can give them next. It’s also a money loser because the car doesn’t have any options, and Tesla needs to make money. But Tesla first started marketing this car for the masses and it’s a luxury car to begin with, so as long as it had a/c, electric windows, and some kind of infotainment you couldn’t go wrong. But then came “production hell.” The base model became a back burner to go with it.
Because of the new pricing structures and assembly timelines, this variant’s production is not often produced, in fact as of this writing it hasn’t as of yet at least at full production, and is pushed back by six to nine months, to take care of the earliest reservation holders. So according to TechCrunch: “That means a person who plunked down a refundable $1,000 deposit on March 31, 2016 might not get the standard battery Model 3 until March 2019.”
What to do if you still want a Base 3
For you $35,000 base model holdouts: you can continue to hold out for the cheaper version but there’s no guarantee Tesla will get around to building it. Remember that over a year ago they pushed back delivery of a RWD single motor to early 2018 and 6-9 months in the production world means it may never. However, if you take advantage of your slot on the waitlist and order the most popular versions and options of the car however expensive, you can get your car in as little as two months.
If you’ve been looking at the wait-list writing on the wall to still want a base, you’ve been smarter to change your expectations anyway, and sit back and be patient. Do nothing and your place in the queue continues on hold. Tesla keeps mentioning a base car at its design studio website. If you keep them at their word and extrapolate from the new pricing and timeline structure they’re giving us, this could possibly mean that it’ll be up to a good 9 months before you see your base sedan in your driveway, I’d say up to a year or so.
Will the now nonexistent Base Model 3 be the Holy Grail?
You would think the GT or top line versions of a car would become the coveted collector item. Maybe not so for the Model 3. For you diehard single battery packers who still want one I say this: of the hundreds of thousands of 3s on the road, present, future, and yes past because a few have already been wrecked, your variant will be the rarest of all. Treasure it. It may not be the fastest, best handling, sexiest, most luxurious of the variations, but I bet you drive it like you waited for it: you’re in no hurry. So at best there might be a few hundred, maybe a few thousand(s) compared to hundreds of thousands of all wheel drive and/or dual motor ?
The only two things Tesla will guarantee to you is that your Model 3 will be assembled at brick or tented Fremont Assembly sometime after you place an order online at the Tesla design studio, and that the car will be ready for pickup in at least 2-4 months, probably more.
As they move out of “production hell” one of the many things Tesla needs to improve is their walk around cash flow. But they need to do it in a way that doesn’t create new debt and doesn’t dilute earnings. Collecting these “fees” that actually goes to the cost of the car and keeps money in the “office cash box” is one way of doing it.
So as we come to the final moments of what history will define as Tesla’s self inflicted “production hell,” Tesla must decide what kind of company it wants to be as it endures what is perceived as either growing pains or the final pains before death: cash flush v. cash strapped, profitable v. bankrupt, a reusable sustainable energy company v. a company that barely made an electric car, and with no more tax credit, a manufacturer for the niche v. the masses, and finally:
The maker of a car the 21st century will carry into the future that all of us will never forget v. the maker of a car whose company no longer exists for us to barely remember.
Which shall it be?
How do you feel about these decisions Tesla made about its future and the Model 3? Are you still waiting for your Model 3? If you finally have it, how did the ordering process go for you? What changes does Tesla need to make? Let us know in the comments section below.