Tesla is rejiggering its Fremont factory to build the Model Y SUV and a Model S refresh – CNBC

Tesla is rejiggering its Fremont factory to build the Model Y SUV and a Model S refresh - CNBC
Tesla to build Model Y in Fremont, Model S refresh September – report
Tesla is rejiggering its car factory in Fremont, California, to make way for production of the Model Y crossover SUV, as well as a refresh of the Model S with a more minimalist interior design and longer-range battery, according to several current and former employees.

These initiatives could raise costs again for Tesla, just as CEO Elon Musk has vowed to review every 10th page of outgoing expenses, personally. But starting up production of the Model Y in 2019 allows Tesla to tap into the growing SUV segment sooner rather than later, while a Model S refresh would help it maintain or grow its share within the declining market for luxury sedans.

The company has barely begun to place orders for new equipment to manufacture the Model Y, employees said. And while Musk has suggested that Tesla would probably make the crossover SUV in Fremont, Tesla hasn't officially announced that preparations in the factory had begun.

What is Musk replying “Yup” to? I would guess that hes talking about CleanTechnicas point that everyone overreacted to the leaked e-mails from recent weeks. However, lets not forget that weve seen before, like in Q1 where orders were supposedly so high that Teslas system crashed, yet there was a big miss when they actually announced the numbers. If Tesla were to miss, it brings up the question of how truthful management was when reiterating guidance to sell the latest capital raise. In the next week, well get a variety of estimates for Tesla deliveries in the US/Europe in May, which will make it a bit more clearer on what Tesla may announce in early July.

Making way for Model Y production in Fremont will require Tesla to combine Model S and Model X production into one line, according to the insiders. These lines at the car plant take up a significant amount of floor space today, at least partly because the S and X are each made with a lot of parts. The Model X is particularly complicated to build — its features include falcon wing doors that open up, rather than out — leading Musk to liken it to a "Faberge egg. "

Aside from my side note above, I encourage everyone to be cautious with targets and forecasts like this. It appears Tesla is still working to slowly increase production capacity, could still face numerous delivery hurdles before the end of the quarter, and might be more likely to deliver 74,000 or so vehicles in the quarter. Who really knows? Remember that Tesla is supposed to now be in the process of unwinding its wave-like delivery schedule — that might come with unexpected challenges. Additionally, even Elon Musk doesnt know how many people will order Tesla vehicles tomorrow, next week, or next month.

Tesla Model S Refresh With Minimalist Interior and Model 3 Motors Coming This Year: Report

In addition to the Model Y, Tesla is planning on a full refresh of the Model S, which employees say will likely include an interior with the minimalist look and feel of the newer Model 3, the same drive units and seats used in the higher-end Model 3, and a battery that delivers 400 miles of range on a full charge.

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Tesla has recently been canceling factory tours because of "upgrades" being made to the factory, according to Musk, who didn't say exactly what those upgrades entailed.

Meanwhile, production has already slowed on the current S and X models. In the first quarter of 2019, Tesla laid off a portion of its Model S and X production staff and cut hours for those who remained, as CNBC previously reported. Today, Tesla only manufactures the S and X on day shifts during the week in Fremont. There is no weekend or nighttime production of those cars today, according to the current and former employees.

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Last week, Tesla cut prices on its Model S by $3,000 and Model X by $2,000, and rolled out a free supercharging incentive to entice customers, causing some analysts to question whether demand is softening for these older, higher-priced models. This follows a set of upgrades in April that improved the driving range and charging speed for both cars.

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On investor calls recently, Tesla reiterated guidance that it would deliver 90,000 to 100,000 cars in the second quarter of 2019, and at least 360,000 in 2019. It has not said how many of these would be Model S, X and Model 3 vehicles or, eventually, Model Ys.

Nobody is going to buy Tesla — the company is on its own

Tesla shares fell more than 10% last week on investors' concerns over demand, profitability and the impact of U.S.-China trade clashes on the company. They recovered slightly after an email leaked in which Musk promised that Tesla was on target to meet its second-quarter goals.

But technology companies that might have once viewed the multitrillion-dollar global auto industry as a ripe opportunity have now sampled the market and decided the actual building and selling cars probably isnt the way to go. Better to do as Waymo has done, developing a hardware-and-software self-driving system that can be installed in vehicles manufactured by partners such as Chrysler and Land Rover.

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The problem with this prediction is that nobody wants to buy Tesla anymore — except for maybe investors, who recently gobbled up a nearly $3 billion stock offering. Tesla looked better as an acquisition target a few years back, before it became a 250,000-vehicle-a-year carmaker and revealed that it wasnt immune to the economics of the auto industry.

Tesla Model S refresh tipped to make two huge changes

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